Archive for December, 2009

  • Papers & Events: Bank Sarasin’s “Resource Efficiency” Metrics Cast New Light on Sovereign Debt

    December 22nd, 2009 by ewalsh

    If you open up the papers lately, you’ll find the discussion of the sovereign debt crisis tends to focus narrowly on offending nations’ profligate spending and borrowing habits. While these behaviors have no doubt contributed to fiscal deficits, what is often overlooked is that addressing another kind of deficit–an ecological one–is of equal importance if nations are to sustain healthy and resilient economies. One bank is working to advance this notion by incorporating into its sustainability rating of sovereign debt a country’s resource efficiency. Bank Sarasin, a Swiss private bank founded in 1841, launched the first investment fund based on the concept of eco-efficiency in 1994 and has been including social factors in its sustainability ratings since 1997. Sarasin’s sustainability rating of sovereign debt assesses a country’s creditworthiness based not only on resource availability but also on resource efficiency. Viewing a country’s ability to repay its debt over the long-term through this holistic prism yields some noteworthy results: resource-rich but inefficient economies such as the United States and Russia appear particularly vulnerable to future rating downgrades while resource-scarce but efficient countries like Japan, the Netherlands, and Germany appear much less at risk.


    The Sarasin sustainability rating is formulated by plotting a matrix with “availability of resources” on the x-axis and “resource efficiency” on the y-axis. Those countries scoring highest in the resulting scatter diagram are located in the upper right quadrant and those scoring lowest in the lower left. Bank Sarasin uses this methodology to determine whether a country is a candidate for inclusion in its sustainability funds. Sarasin considers a variety of factors in its analysis, including a country’s biocapacity, its Ecological Footprint, “ecological deficit or surplus,” nuclear energy generation, water footprint, human capital and financial capital. The inputs also include dimensions of climate change, such as changes in agricultural productivity, population and land area in low-elevation coastal zones, and animal species diversity. To determine the efficiency of resource-use, Sarasin assesses quality of life indicators, including health, education and material wealth and introduces two novel metrics: “transformation efficiency” — a measure of quality of life achieved against the rate of resource consumption required to achieve it — and “process efficiency,” which measures the “efficiency” of societal, political, and economic processes.


    Viewing investments in sovereign bonds from a sustainability perspective, Sarasin’s methodology obviously tends to rate the debt of countries with ample resources and high resource efficiency higher than those with low resource availability and low efficiency. That said, as noted above, countries that make efficient use of scarce resources may in the long-run achieve a higher rating in the Sarasin Sustainability Matrix than those that squander their ample resources. figure22_inv.previewfigure22_spec.preview Investment-grade Speculative-grade While Sarasin acknowledges that its sustainability rating is a relative measure of a given country’s sustainability based on the interplay of environmental, economic and social factors, it reports that — thanks to the data elaborated by the Global Footprint Network — it may be possible to measure a country’s absolute environmental sustainability. In the context of the cornerstone principle of sustainability, a country should never use more of the earth’s resources over a given period of time than can be regenerated. A country’s absolute sustainability position can thus be assessed by comparing its Ecological Footprint with its average local as well as the average global biocapacity. Although this measure has no direct, short-term bearing on the specific country’s economic or social conditions, Sarasin contends that an ecological reserve is a prerequisite for absolute sustainability in the face of tightening resource constraints. Countries with an ecological deficit are often those with large carbon footprints, and would benefit from taking measures to decrease their footprint over time, as this will reduce their resource risk. Many of the nations struggling the most to achieve sustainability are developing economies, often characterized by an already high and further increasing population density. In a resource-constrained world, these nations will be required to achieve extraordinary levels of resource-efficiency if their populations are to achieve improved quality of life. Fortunately, some of these countries are now taking bold steps to address this challenge, as they become leaders in the development of alternative fuel technologies like solar, wind or clean-energy vehicles. Indeed, these emerging economies are shaking the foundations of the global economy in a transformative way amidst the global recession and can look forward to reaping the long-term benefits. As the Earth’s absolute sustainability erodes at an increasingly rapid pace, their contribution to the game of catch-up will be critical. For more information on Bank Sarasin and its publications, click here.

  • Papers & Events: Council on Economic Policies Is Launched

    December 22nd, 2009 by ewalsh

    We recently spoke with Alexander Barkawi, founding director of the newly launched Council on Economic Policies, an internationalAB_Photonon-profit, non-partisan economic policy thank tank. Alex is the former managing director of SAM Indexes and was responsible for developing the Dow Jones Sustainability Indexes (DJSI) into a recognized reference point for sustainability investing. He is also president of the oikos Foundation, which supports the integration of sustainability issues into teaching and research at faculties for economics and management worldwide.

    Half German and half Egyptian, Alex has been interested in sustainability since his teenage years. After studying economics at the University of St. Gallen and earning a Ph.D. at the university’s Institute of Sociology, he joined SAM, the asset management partner of Dow Jones for the Dow Jones Sustainability Indexes, where he worked for more than 9 years. “I enjoyed those years immensely,” he reflects. “The more money we moved behind the indexes the more important it was for companies to be included in them. We followed – and SAM and Dow Jones still follow today – a best-in-class approach in every sector so companies competed with each other with every annual review. We created a dynamic where companies even began to structure variable payments to their boards dependent on whether they made it into the Dow Jones Sustainability Indexes.”

    After leaving SAM in 2009, and next to his work for oikos, Alex spent time reflecting on the critical role policy must play in the shift to a sustainable economy. “To what extent companies integrate sustainability into their business practices will depend on how it aligns with their long-term profitability, and that I see is very much defined by policy frameworks,” he says. “Ensuring that price signals support sustainable behavior depends on both the day-to-day activity of market participants as well as smart policymaking for the long-term.” [For more thought on this topic see Tony Greenham’s reflection on “Why We Need Investment Grade Policymaking,” featured in Capital Institute’s Braintrust series.]

    CEP will focus its work on three policy areas: fiscal, monetary, and trade. In the realm of fiscal policy CEP will explore how tax systems might be structured to support job creation, social cohesion, and sustainable use of resources. The first research efforts will be proposals for such tax structures in Switzerland, Egypt, and South Korea. “Our goal is to come up with a proposal and over the years, through campaigning and advocacy, make that proposal a key reference point in policy debates,” Alex reports. The CEP’s monetary policy research will begin with an examination of the economic, social and environmental impact of the quantitative easing.

    On the trade policy front, two initiatives are being considered. First, trade in financial services and sustainability will be examined, with reference to how trade agreements influence policy space for financial regulation and drive regulatory convergence. A second project will have a regional focus on trade, particularly in services, as a tool for sustainable development and job creation in the Middle East.

    CEP’s founding members represent expertise from both the mainstream and nontraditional global finance, economics, and policymaking communities. They include Ann Florini of Singapore Management University and the Brookings Institution, Dongsoo Kim of the Korea Productivity Center, Gilles Carbonnier a professor at Switzerland’s Graduate Institute of International and Development Studies, Knut Bergmann at the office of the President of the German Parliament and Fellow, Stiftung Neue Verantwortung, Germany, Peter Zollinger partner at Globalance Bank and Council Member, SustainAbility, Raj Thamotheram, President of the Network for Sustainable Financial Markets, and Stephen Boucher, Programme Director of the European Climate Foundation.

    Find out more about CEP here. Follow Alex Barkawi at @abarkawi.

  • Papers & Events: Diana Propper de Callejon on Integrated Value Investing

    December 22nd, 2009 by ewalsh

    In her paper, “Integrated Value–A New Private Equity Model for Driving Value Creation,” adapted from an article published in Private Equity International, Diana Propper de Callejon, a General Partner of Expansion Capital Partners LLC and a member of Capital Institute’s Board of Directors, reports on the emerging opportunities for investing in sustainability that her venture capital firm is accessing as it identifies the “next wave” companies that are truly embedding sustainable practices into the core of their business models. (In an upcoming Profile we will talk with Propper de Callejon in depth about her personal journey from clean tech investor to integrated value investor.)

    In describing the first phase of the evolution of corporate sustainability practice over the past 30 years, Propper de Callejon notesDP_Newthat companies tended to define sustainability narrowly and somewhat defensively, with a focus on complying with environmental regulations and with reputation management. In a second wave, companies began to view sustainable practices somewhat more opportunistically, as a way to either reduce costs (by implementing energy efficiencies, for instance) or as revenue generators along discrete product lines (renewable energy or other “clean” technologies, for example). In the third wave, she reports, a new generation of private companies are, from inception, committing holistically to a corporate vision of “continuous improvement in environmental performance and social impact…as a primary driver of innovation and value creation over the long term.” The latter companies see this commitment as inextricably linked to their position as industry leaders and as fundamental to their long-term competitive advantage.

    Investing in these “high-performing, integrated-value” companies offers “a compelling investment opportunity, especially for long-term, values-aligned financial partners that can nurture, strengthen, and expand this new model of value creation,” says Propper de Callejon. She goes on to describes her own firm’s strategy for integrated value investing: first identifying lower-middle market companies that “demonstrate the capacity for continuous improvement and strong growth” closely linked to their integrated value business models. ECP then secures “meaningful” ownership stakes in these companies and works closely with management to strengthen their sustainable business practices, and, in some cases, to innovative new business models. ECP also helps management address a more “technical challenge,” developing an integrated set of metrics and reporting systems that link, to the extent possible, sustainable practices with financial performance.

    The next step for Propper de Callejon is to explore an investment vehicle to support these “next wave” companies over the long term, giving them the time they need to realize the value of their sustainable practices without undo short-term pressures. This approach, says Propper de Callejon, will have “a greater likelihood of maximizing exit returns based on market dynamics and company’s lifecycle rather [offered by] the normal limited life of a private equity fund.”—Susan Arterian Chang

  • Papers & Events: Does Growth Equal Progress

    December 22nd, 2009 by ewalsh

    Last week, Capital Institute network organization Demos released a striking report and series of graphics on the myth that economic growth equals progress.  The report lays out the argument for rethinking our national accounts while the graphics visually detail the failures of GDP as a measurement of progress.

    Click here to download the report.
    Click here to enlarge the slideshow.
  • Papers & Events: Economists Explore Why GDP Doesn’t Add Up and Question Growth Model

    December 22nd, 2009 by ewalsh

    “Mismeasuring our Lives: Why GDP Doesn’t Add Up,” a panel discussion held at Columbia University on December 7, brought four distinguished economists together for an open conversation that began with the need for policymakers to look beyond GDP as a standard economic measure to address both ecological constraints and human well-being but moved to the central challenge of our time: can economies continue to grow without degrading the ecosystem and if not, what are the alternatives? Sponsored by the public policy research and advocacy organization Demos, the event featured panelists Alan B. Krueger, most recently the US Treasury’s Chief Economist and currently Bendheim Professor of Economics and Public Affairs at Princeton University; Glenn-Marie Lange, Senior Environmental Economist at the World Bank; Juliet B. Schor, Professor of Sociology, Boston College; and Joseph Stiglitz, Nobel Laureate and Co-Chair of the Committee on Global Thought at Columbia University. Mismeasuring our Lives is also the title of a new book by Sitglitz, Amartya Sen and Jean-Paul Fitoussi, billed by its publishers as “the essential guide to measuring the things that matter.” Sen and Fitoussi were members of French President Nicolas Sarkozy’s Commission on the Measurement of Economic Performance and Social Progress. Chaired by Stiglitz, the commission assembled a group of eminent economists to address the inadequacy of GDP as a performance measure and to investigate new ways to monitor and assess the sustainability of the global economy and human well-being. (The working papers and reports of the Commission can be found here.) Stiglitz noted that Sarkozy’s motivation to establish the commission was twofold. First, it was clear to him that the average French voter cared much more about environmental and social issues than he or she did about maximizing per capita GDP. Second, when government announces GDP per capita is growing people typically don’t feel better off as a consequence. This fundamentally undermines confidence in government. Stiglitz also noted that GDP growth numbers, particularly when they are expressed in per capita terms, fail to reflect the trend of growing global income inequality. For example, despite growth in per capita GDP, the median US income was lower in 2008 than it was in 1997. Today, the top one percent of the US population earns more than one quarter of the nation’s income. One conclusion of the Sarkozy commission, said Stiglitz–which gets to the heart of why our current metrics system has allowed us to proceed along a path of unsustainable growth–is that no single indicator can be depended on as a guide. He used the analogy of a car’s dashboard where a focus on the speedometer alone without reference to the fuel gauge results in an inadequate assessment of performance. In his concluding remarks, Stiglitz noted that over the past 40 years, the US and Europe have used the productivity “dividends” of technological innovation in very different ways. The US worked more and consumed more goods. Europe used time–the byproduct of those dividends–for leisure. “The US learned how to consume more things and Europe learned how to consume leisure,” said Stiglitz, and the US pattern is not a sustainable one. Krueger also referenced the dashboard analogy, but noted that the real time reports we get from dashboard indicators need to be supplemented by longer term assessments, or “10,000 mile checkups.” He also raised an issue policymakers have tended to side-step, perhaps because it requires an acknowledgement of how intractable our economic problems are-that we need to focus on helping the chronically unemployed lead better lives–through richer social connections, volunteering and family activities. (Schor’s plan for a shorter work week — see below– was particularly relevant to this discussion.) Krueger described a new well-being measure based on a national time accounting methodology, which measures the fraction of time people report being in an “unpleasant” state. He made the case for policymakers to focus on lowering human misery using this measure. While he was pleased to note that the U.S. Labor Department plans to incorporate the American Time Use survey in its ongoing reporting, Krueger cautioned policymakers not to expect dramatic improvements in this measure. Glenn-Marie Lang focused on the measures of asset accumulation the World Bank uses to monitor developing country’s progress in lifting populations out of poverty: produced capital, resource or natural capital, and intangible (human) capital. If wealth is declining, she reported, it is often because these nations are liquidating their natural capital in an unsustainable manner, that is, without transforming it into sustainable, long-term income flows. She also noted that in countries where institutions are weak, human capital fails to be optimized. She sited the example of China where since the mid- 1990s market reforms have supported human capital growth. A new book to be published by the World Bank this December, The Changing Wealth of Nations: Measuring Sustainable Development in the New Millennium, offers the first, longer term assessment of wealth building using more comprehensive measures of wealth for over 100 countries. Juliet Schor, whose book Plenitude describes new ways of defining wealth in a resource-constrained global economy, spoke of the major trend she saw emerging in the 1980s and 90s when she undertook studies of American working hours, indicating a widening divergence between GDP growth and reported well-being. The Sarkozy Commission, she noted, was right to conclude that sustainability cannot be reduced to “value” terms and that it must also be measured in terms of physical and planetary boundaries. Consequently, she maintained, if we take seriously the call for biophysical measures we must involve scientist not just economists. She also praised the Sarkozy Commission for highlighting that in an environment of extraordinary uncertainty, resilience must be part of the economic conversation. That means, said Schor, that we must pay attention to the diversity of our economy not just its output alone. Schor also raised fundamental questions about growth. We haven’t figured out how to expand our economy without degrading our ecosystem, she reported, and doing that will be our next great global challenge. Although mainstream economists rejected the notion of limits to growth in light of biophysicial boundaries when the Club of Rome introduced the notion in the 1970s, the idea is again gaining currency. How can the US solve its unemployment problems in an era when we have no rightful claim on ecological resources? Part of the answer, says Schor, is a national transition to shorter work hours with more meaningful and productive use of our “non-market” time, resulting in a lower carbon footprint and enhanced well-being.

  • Papers & Events: ESG and the Problem with Business as Usual

    December 22nd, 2009 by ewalsh

    We were very pleased to read Al Gore and David Blood’s “Manifesto for Sustainable Capitalism” in the WSJ last week.  It called for “a framework that seeks to maximize long-term economic value by reforming markets to address real needs while integrating environmental, social and governance (ESG) metrics throughout the decision-making process.”  Companies that integrate sustainability into their business models and investors who evaluate them on that basis, the manifesto claims,  are finding their profitability enhanced over the longer term.

    We only wish Gore and Blood had focused a bit more, and in blunter terms, on the dire consequences of operating under “business as usual” and about the deeply flawed valuation methods that are used to model it.   We talked about these last week with Steve Waygood, Director of Sustainability Research at Aviva Investors. He pointed out that by continuing to use discounted cash flow and other short-term focused valuation tools that ignore the rapidly approaching era of resource scarcity, companies and investors are setting up the global economy for a period of disruption that will make past credit crises look like a walk in the park. As the sixth largest insurance company in the world and an asset manager with over L235 under management, Aviva is far more concerned, Waygood reported, about the market impacts of a natural resources crunch than of another credit meltdown.  So should we all be.

  • Papers & Events: Fiduciary Duty Revisited

    December 22nd, 2009 by ewalsh

    In “Reclaiming Fiduciary Duty Balance,” James Hawley, Keith Johnson, and Ed Waitzer maintain that narrow interpretations of fiduciary duty have “generated myopic investment herding behaviors” and caused fiduciaries to focus increasingly on their short-term liabilities at the expense of longer-term ones. Institutional fund trustees, the paper argues, cannot meet those longer-term obligations unless they have access to information on the full range of ESG risks for the companies in which they invest. The sorry state of ESG corporate reporting suggests that they do not have such access now. If fund trustees begin to exercise this fiduciary responsibility in earnest, the impact on public company reporting will be immense. Institutional funds collectively own 73% of the stocks issued by Fortune 1000 companies.

    In their paper, “The Role of the Board in Accelerating the Adoption of Integrated Reporting,” Robert G. Eccles and George Serafeim make a similar argument to Hawley et al’s. They assert that it is the fiduciary responsibility of a corporate board to support “an organization in addressing…the material issues affecting its ability to create and sustain value in the short, medium, and longer term.” Eccles and Serafeim call on boards to support the integrated reporting of corporations’ financial and nonfinancial information, claiming that sustainable value creation cannot take place without it.

  • Papers & Events: Highlights from Workshop–“Redesigning Finance: Pathways to a Resilient Future”

    December 22nd, 2009 by ewalsh

    On August 9th 2012, institutional thought leaders were invited to a workshop gathering in San Francisco convened by Corporation 20/20, Tellus Institute, and Capital Institute to discuss “Redesigning Finance: Pathways to a Resilient Future.” Presenters included Joshua Humphreys, Fellow of Tellus Institute, Marjorie Kelly, author of the recent book Owning Our Future: The Emerging Ownership Revolution, Allen White, Vice President and Senior Fellow of Tellus Institute, and John Fullerton, Founder and President of Capital Institute. Attended by leaders of 20 investment firms, institutions, law offices, and foundations, the one-day workshop started with Allen White’s setting the stage with a discussion of the current dominant framework in which society “lurches from one crisis to another.” He called for a rethinking of the purpose of finance to include support for the creation of more just and resilient economies. Capital Institute Founder and President John Fullerton focused on the $20 trillion of unburnable carbon challenge (if we are to avoid exceeding the threshold of 2 degrees Celsius warming), leaving us with a “Big Choice” of business-as-usual or the survival of our planet. He went on to call for a “regenerative economy” that has its architectural roots in nature as well as a better narrative to promote sustainability. Marjorie Kelly struck a similar tone to Fullerton’s, focusing on the emergence of “generative” enterprises that are designed as living systems. She went on to elaborate that “behavior comes from structure,” and that in economic enterprises, the core structure comes from ownership. This issue of ownership will play a major role in identifying ownership of public goods, particularly as it relates to issues of sustainability. Finally, Joshua Humphreys closed out the workshop by examining the financial system beyond modern portfolio theory, offering a new idea of “Total Portfolio Activation” that helps investors identify opportunities by asset class that can benefit society and the environment. For example, cash and cash equivalents can be placed into productive use by providing deposits to credit unions that help finance low-income families. Additionally, Humphreys points out that fixed-income assets such as the World Bank Green Bonds and community development loan funds such as Boston Community Capital can help support countries and communities hit hard by ecological and economic crises, echoing the notion of finance as the servant of the economy, not its master. Subsequent discussions of the presentations revealed that much work is ahead, including working of a new narrative to challenge old paradigms, addressing inequality, the notion of endless economic growth as well as more diversity in expertise of systems design. For full details, check out the highlights from the workshop here.

  • Papers & Events: “Investing for Impact: Case Studies Across Asset Classes” Report Sheds a Light on Impact Investing Asset Allocation

    December 22nd, 2009 by ewalsh

    Among the formidable challenges facing the further development of the impact investing market is the lack of an accepted framework for assessing deal structures that can be utilized as an asset allocation tool by the full spectrum of impact investors. “Investing for Impact: Case Studies Across Asset Classes,” begins to fill this breach. A joint project of London-based social investment firm Bridges Ventures, strategic advisors The Parthenon Group (with offices in Boston, London, Mumbai and San Francisco), and the New York-based Global Impact Investing Network, “Investing for Impact” follows on the earlier comprehensive studies of the sector published in 2009 by the Monitor Institute (“Investing for Social and Environmental Impact”) and Rockefeller Philanthropy Advisors (“Solutions for Impact Investors”).

    What sets this latest report apart is a succinct, formatted presentation of a significant number (19) of deals and funds. Each deal is outlined in terms of the investor motivation(s) (financial first, impact first or a “layered” combination of the two); the asset class; the sectoral area of impact (community banking, rural poverty, sustainable forestry, etc); the specific social/environmental impact; and the financial impact as measured against a relevant financial benchmark. For example, the first case provides background on financial-first investor TIAA-CREF’s Shorebank Deposit Program, which allows the institution to earn a financial rate of return of 1 year treasuries plus a premium as part of its Community Bank Deposit Program. Shorebank in turn measures the social and environmental impact of TIAA-CREF’s deposit investment through its extension of conservation and/or community development loans and advisory services, with over $371 million mission loans extended in 2008. Bridges Ventures Social Entrepreneurs Fund is presented in a case study of an impact- first investor vehicle. The fund, which invests in social enterprises that want to scale up but have not yet generated the level of financial returns required to attract commercial capital, offers a target financial return of 3-5% net of fees, and losses, with social impacts measured by Bridges Social IMPACT scorecard.

    The study also highlights two “layered” deals. These involve structures unique to impact investing, where both financial-first and impact-first investors participate. The first “layered” case is The International Finance Facility for Immunisation (IFFIm). Launched by The UK government to help fund the GAVI (immunization) Initiative, which was seeded by a $1.5 billion grant from the Gates Foundation, the IFFIm has received an additional promise of $5.3 billion in grants the UK, France, Italy, Spain Sweden and Norway to be donated over a 20-year period. Thanks to the grant provisions the facility was able to achieve a AAA/Aaa rating and offer returns at a small premium to government bonds of the same rating. Consequently the facility has been able to attract $1.6 billion in funding from financial-first global investors, both retail and commercial. On the impact side, the facility has enabled the protection of 213,000 children and prevent 3400 premature deaths. The second layered deal described by the report, The New York City Acquisition Fund, includes a consortium of financial-first investor banks and a group of impact investors including The City of New York, the Ford Foundation and the Rockefeller Foundation. The banks have provided $160 million in senior debt indexed to the prime rate, and the impact first investors have funded $40 million in low-interest subordinated loans. The fund’s objective is to provide 30,000 units of affordable housing over a period of 10 years in New York City.

    Among the noteworthy and hopeful conclusions drawn by the authors of “Investing for Impact” is the evidence that many “impact-first” funds have evolved into funds that are also attracting “financial-first” investors. Launched initially by foundations or high net worth individuals who were willing to accept a below-market rate risk-adjusted return to achieve deep social or environmental impacts, these funds have established track records of success, generating risk-adjusted returns that are drawing in commercial and institutional investors. This highlights the pivotal role that those willing to accept below-market rate returns will continue to play as they help to “seed,” deepen, and broaden the impact investing market for financial-first investors.

    “Investing for Impact” also makes the point that, increasingly, new impact capital is achieving market rate returns, often without any form of subsidy. This new capital is being deployed across an increasingly wide asset and geographic spectrum: “In Mexico, Ignia is developing housing communities for families who earn less than $10,000 a year while still targeting above market-rate returns,” the study reports. “In Honduras, Pico Bonito is looking to receive a 20% IRR from the regeneration and sustainable forestry of native forests adjacent to a national park without the aid of local government subsidies. These investment vehicles are examples of how expansion into new asset classes is helping to broaden the reach of Impact Investment, while allowing investors to diversify across multiple asset classes.”

    The stakeholders who have thus far nurtured the Impact Investing market have dedicated themselves to preserving its integrity of purpose. It might be said that the nature of this commitment is without capital market precedent. However, “Investing for Impact” sounds a cautionary note, raising the central question as to whether the same levels of impact can continue to be achieved for a given rate of financial return as the sector scales up to meet the pressing social and environmental challenges of the global village The answer to this question, the authors of the report maintain, “will prove critical to the future of the sector.”

    (The study offers an excellent Appendix on Market Benchmarking and a comprehensive Appendix of Further Reading and website sources)

  • Papers & Events: Juliet Schor at Demos: People, Power and Ecopower

    December 22nd, 2009 by ewalsh

    Chet Baker’s warm, presencing voice and trumpet ushered in the inaugural event of Demos’ “Sustainable Progress Initiative” at the public policy research and advocacy group’s Manhattan offices on the night of October 6. The Initiative’s new senior policy analyst Mijin Cha and its director Lew Daly introduced best-selling author and economist Juliet Schor and her plenitude model, and the evening (which was cosponsored by the World Policy Institute) became an exploration of the model’s potential to free up Americans to be present to explore the dimensions of a more meaningful “livelihood.”

    Schor’s latest book, released in paperback under the title: True Wealth: How and Why Millions of Americans are Creating A Time Rich, Ecologically Light, Small-Scale, High-Satisfaction Economy, describes the plenitude model, which calls for Americans to work fewer hours and reap the benefits of both “time wealth” and reduced carbon footprints. Schor reports that she wrote True Wealth as a solutions manual, sensing that Americans were yearning for an alternative pathway rather than a dissection of what we all know is a broken economic and social system.

    While much of True Wealth focuses on micro “household” strategies, Schor notes that change at a macro policy and institutional level—including how health care and other employee benefits are administered—will also be required to enable a reduction in working hours for the average American. “In this country the average hours of work have been increasing for three decades,” she reports. “In 1960 we had more leisure time than Europeans, now the reverse is true. We work 400 hours a year more than Germany.”

    It is Schor’s belief that as people work less hours there will be a corresponding shift toward lower cost, less wasteful consuming, more sharing and more “self provisioning.” She calls it “connected consumption” and notes that it is already evident in phenomena like couch surfing, tool libraries, and the popularity of Zipcars. “You will get the goods and services you want with less cash expenditure, you will consume in more ecological ways, and there will be less acquiring and discarding of things,” she reports. With more leisure time but less income Americans will also be likely to pursue their passions and acquire new, less resource-intense skills—she sites the examples of permaculture and “fab-lab” technologies. These new skills will in turn lead to the incubation of new careers and sustainable small businesses.

    Schor also points out that the new plenitude model is about deepening social connections because the emerging consumer and production patterns will be high in social capital. Going forward our necessarily less fossil-fuel-dependent economy will also lead to more local, small-scale production of goods and services, she concludes. The result will be more resilient American households and communities.

    —For more on the plenitude model see our Braintrust profile with Juliet Schor. (True Wealth was published in hardcover under the title Plenitude.)

  • Papers & Events: Limits to Growth Redux

    December 22nd, 2009 by ewalsh

    Twitter went aflutter this week with late-breaking (two years late) news in Smithsonian Magazine that Australian physicist Graham Turner had compared the findings of the landmark Limits to Growth report to actual recorded data from 1972-2000 and the Limits to Growth model held up remarkably well. Turner’s report, titled “A Comparison of the Limits to Growth with Thirty Years of Reality,” finds that in all five of the key global economic subsystems – population, food production, industrial production, pollution, and consumption of non-renewable natural resources – the Limits to Growth standard run scenario (essentially business as usual) looks uncannily similar to the actual data, whereas the other two scenarios – stablizing behavior and policies, and comprehensive use of technology – do not. As Turner’s report explains, Limits to Growth has been subjected to countless attempts to discredit its accuracy and cloud public opinion on the issues it raises. “A Comparison of the Limits to Growth with Thirty Years of Reality” cuts through the public distortions and uses real data, and the actual models Limits to Growth draws on, to show that the Limits to Growth report deserves another look. Although this new report does not address finance, we believe that the financial system plays a critical role in deciding the path we will follow: business as usual, rapid technological development, or stabilization. Limits to Growth detailed why we must choose stabilization. As we continue to march on the business as usual path, finance must help us find an off-ramp onto stabilization, or, as this report suggest, we may be in for some serious consequences.

  • Papers & Events: Resilient People, Resilient Planet: A New UN Report

    December 22nd, 2009 by ewalsh

    Twitter went aflutter this week with late-breaking (two years late) news in Smithsonian Magazine that Australian physicist Graham Turner had compared the findings of the landmark Limits to Growth report to actual recorded data from 1972-2000 and the Limits to Growth model held up remarkably well.  Turner’s report, titled “A Comparison of the Limits to Growth with Thirty Years of Reality,” finds that in all five of the key global economic subsystems – population, food production, industrial production, pollution, and consumption of non-renewable natural resources – the Limits to Growth standard run scenario (essentially business as usual) looks uncannily similar to the actual data, whereas the other two scenarios – stablizing behavior and policies, and comprehensive use of technology – do not.

    As Turner’s report explains, Limits to Growth has been subjected to countless attempts to discredit its accuracy and cloud public opinion on the issues it raises.  “A Comparison of the Limits to Growth with Thirty Years of Reality” cuts through the public distortions and uses real data, and the actual models Limits to Growth draws on, to show that the Limits to Growth report deserves another look.

    Although this new report does not address finance, we believe that the financial system plays a critical role in deciding the path we will follow: business as usual, rapid technological development, or stabilization.  Limits to Growth detailed why we must choose stabilization.  As we continue to march on the business as usual path, finance must help us find an off-ramp onto stabilization, or, as this report suggest, we may be in for some serious consequences.