Financial Stewardship

  • The Courage to Lead

    September 25th, 2014 by ewalsh


    Image courtesy of Dagens Næringsliv

    Image courtesy of Dagens Næringsliv









    This post previously ran on the Huffington Post as part of the “Plan B for Business” series to help articulate a Plan B for Business.

    Henrik O. Madsen joined Norway’s DNV, the world’s leading ship and offshore classification company, in 1982.  Thirty-two years later, as Group CEO of the recently merged DNV GL, now a Euro 2.5 billion global enterprise, Henrik made a speech few CEOs will ever have the opportunity to attempt.

    He chose not to waste the opportunity when he addressed a crowd of 4,000 guests gathered in Oslo last June to celebrate the company’s 150th anniversary.  The “V” in DNV, after all, stands for “Veritas,” which translates from the Latin to “truth.” Without a doubt, Henrik spoke it on that day, as I suspect he always does.

    In addition to moving reflections on the culture that has endured through a century and a half in business, he boldly articulated the profound challenges and opportunities ahead, and reminded the audience that “unlimited growth on a limited planet is a physical impossibility.”  He went on to describe DNV GL’s commitment to sustainability, both for the organization itself and for its 80,000 customers around the world.  It takes uncommon courage to discuss limits to growth of material and energy use when your largest client industry groups include shipping, and oil and gas.

    In a press interview following the anniversary event and a two-day roundtable on sustainability that I was privileged to participate in, Henrik repeated his mantra, “you can’t have unlimited growth on a limited planet,” to the entire Norwegian business and political community.  He and his colleagues went on to criticize the State-owned oil company Statoil for their decision to invest in the environmentally destructive and carbon-intensive Canadian Tar Sands.  Statoil is DNV GL’s largest client.

    During the two-day roundtable, we assessed and critiqued the concept of a “Regenerative Economy,” grounded in an understanding that living systems that survive are by their very nature regenerative. We agreed that as a living system, the human economy must itself operate regeneratively to be truly sustainable.  It was a vision, we concluded, for an honest conceptual framework to describe how economies must work on Henrik’s “limited planet” if humanity is to change course and is not to destroy its own nest.

    DNV GL’s intuitive commitment to Regenerative Economy thinking is well grounded in its own culture and business practices.  In a very real sense, like the many projects described in Capital Institute’s Field Guide to Investing in a Regenerative Economy, DNV GL is already living the principles described in the conceptual framework.  It is showing that not only is it possible, it’s already very real, if only we had the economic framing to better describe it.  As Einstein famously said, “it is theory that determines what we can observe.”

    There is probably no such thing as a truly regenerative global company today, but DNV GL is one of the few large global corporations that demonstrates many of the key regenerative qualities that together lead to long-term prosperity.  It is undoubtedly no coincidence that DNV GL just celebrated its 150th anniversary.

    What is particularly interesting about DNV GL in the context of sustainability is its ownership structure.  Never a public company with absentee so-called “owners” placing short-term capital market demands on company decision-making, DNV was owned by a foundation until its merger with GL in 2013. It now has a minority partner, the German family that owned GL for decades.   This means the owners are in deep relationship with the company (and now with each other), and assume the responsibilities and long-term stewardship that goes with such a genuine ownership relationship.

    This stewardship has been defined by an unwavering commitment to a clear purpose: “safeguarding life, property, and the environment,” and core values (integrity, non-hierarchical, open communication) that drive its business throughout the world.

    The second foundational element of DNV GL’s stewardship is its commitment to invest an impressive five percent of its revenues in long-term research.  This investment is not limited to product research directly linked to near-term revenues.  It includes, for example, the cost of convening a series of multi-day roundtables on deep, long-run sustainability challenges with a group of leading thinkers from around the world.  DNV GL’s goal is to grow smarter and wiser, in order to better position itself as a leader for the new opportunities that the world will offer in the future.

    DNV GL’s ownership commitment to purpose and values, and its commitment to research is also quite profound from a living systems perspective, and therefore a key to DNV GL’s “regenerativeness.”  As living systems thinker, Jane Jacobs once said, “it’s not how big you grow, but how you grow big.”

    Systems scientist Sally Goerner teaches us that living systems can only grow sustainably through increasing their structural intricacy and through continuous reinvestment in learning.  A cell divides into multiple, more differentiated cells (becoming more intricate) rather than simply growing into a larger cell lacking the necessary infrastructure to support itself.  And as Darwin taught us, living systems are continuously learning and adapting qualities best-suited to long-term survival.

    DNV GL is able to sustainably “grow bigger” by honoring these same principles.  For example it builds the intricacy of its own management structure by remaining non-hierarchical despite its global reach. It insists on, and measures, the continuous and relentless communication of its values and encourages open discussion about the tensions where those values may be hard to translate into other cultures around the world, or conflict with short-term business objectives.  And its commitment to reinvest profits in long-term research (rather than have that value extracted by short-term “financial engineers”) to ensure the organization is in continuous learning mode demonstrates in part what it means to be a regenerative organization.  Spending a few days with the people at DNV GL convinced me these values are authentic.  Capital Institute will illuminate the full DNV GL regenerative story in an upcoming Field Guide.

    Is Henrik the type of business leader for whom we are desperately searching as we face the daunting challenges of the transition to a truly sustainable economy?  Is his team at DNV GL able to compete in the global marketplace while stewarding these seemingly utopian, but I would call, regenerative principles?

    One hundred and fifty years of experience suggests that the answer is a resounding “yes.”

  • John Lennon Said It Best: “Living is Easy with Eyes Closed”

    July 30th, 2014 by designburd


    I was floored by this Saturday’s New York Times article, “Seeing a Supersize Yacht as a Job Engine, Not a Self-Indulgence.” I was amazed not only by how the subject of the article, Mr. Jones, rationalized his extraordinary consumption habits, but also by the mere fact that the article was published.

    Mr. Jones of St. Louis, we learn, is living the “American dream.” Now in his mid 70s, still married to his high school sweetheart, and apparently a natural born salesman, he built Jones Pharma and sold it for $3.4 billion in 2000 (well done, and good timing). From an earlier 2010 article, it appears that Jones’s personal take from the sale was about $500 million, of which he put 10 percent in a family foundation. I guess tithing is alive and well in St. Louis. With the remaining $450 million, the Joneses are living large in a 33,000- square-foot house in St. Louis, and with several other homes, a Gulfsteam V, and, the subject of the article, a $34 million, 164-foot, custom-built yacht.


    To be fair, such a yacht is not extravagant by billionaire oligarch standards. Larry Ellison recently downsized, and sold his 452-foot Rising Sun to David Geffen, his second super yacht. Paul Allen’s Octopus measures in at 414 feet – his second boat is only 300 feet. Who knew you needed two?

    Mr. Jones sounds like a nice man. Charitable toward the underprivileged in St. Louis in particular, focused on education, and the homeless. And he shares his good fortune with his old “pre-success” friends, inviting them on his jet and yacht all over the world. Nice.

    What floored me was how he rationalized spending $34 million on his new yacht and how uncritically the author Paul Sullivan bought into that rationalization. According to Sullivan, “Mr. Jones said he wanted to encourage other wealthy people to think about how their opulent lifestyles could provide jobs just as their charity helps people in need.” The story goes on to report how his $34 million purchase order in 2013 helped revive the North Western yacht manufacturer who had been forced, out of necessity, to diversify into manufacturing wind turbines and smaller vessels. I guess until Mr. Jones got his mojo back, the mega-yacht purchasing crowd was still laying low following the Wall Street-induced economic collapse. Now that’s the leadership we’ve been waiting for!

    Mr. Jones is, however, on to something. Both investment and consumption decisions have broad implications and multiplier effects, including the job creation that is at the heart of Mr. Jones’s argument. But in the 21st century, a new and far more nuanced understanding of financial stewardship than Mr. Jones’s is required of the very wealthy. And it can, and must, change the course of history. Let me explain:

    • As we know, inequality has reached levels not seen since feudal times in this country. History teaches that such highly unequal societies devolve into either a police state or revolution. This reality alone demands, among other things, “conspicuous under-consumption” by the wealthy, and vastly more strategically directed philanthropy.
    • We are in ecological overshoot, using up more nature every year than the earth regenerates on its own. This means excessive consumption “because they can” by the “most successful Americans” among us impedes others now and in the future from having access to a fair share of nature, including a safe climate to carry on life as we know it. Because of the scale of today’s global economy, this is our new reality, and it is unlike anything we have encountered in the past.
    • Few things are more wasteful of our atmosphere’s finite ability to absorb greenhouse gases than a large, fossil-fuel powered yacht. Mr. Jones’s boat burns 3.75 gallons of diesel per nautical mile (not miles per gallon). The fuel tanks of Mr. Allen’s Octopus cost $900,000 to fill up (in the U.S., twice that on the French Riviera) and burns a grotesque 28 gallons per nautical mile (more if it’s in a hurry). Imagine a gluttonous man in a lifeboat dumping water over his head to keep cool knowing it would cause others to die of thirst later. Someday soon, this will not seem like a strained analogy.
    • Never in the history of civilization has there been such an investment imperative as the transition off our fossil-fuel energy system and onto renewables, estimated at $30 trillion over the next decades. This investment imperative, not consumption, is where we need leadership from the Mr. Joneses of the world.
    • Which leads to my final point. Mr. Jones missed a great opportunity. The shipyard had already diversified into wind turbine blades and smaller (more fuel efficient) boats. Imagine if he had opted for a smaller boat, perhaps crafted out of sustainably harvested wood rather than toxic and unrecyclable composites and with an innovative hybrid electric power system that needs price insensitive early adopters. Perhaps even a sailboat of all things! Either way, he could have put in an order for five of them, and shared them with all his friends so they could still go cruising together (and put them out for charter in the “sharing economy”) while helping stimulate the vital transition of the cruising boat industry in the process. At the same time, he could have invested in the company and helped them accelerate their diversification into wind turbines as a second line of business and actually survive long-term, since manufacturing 160-foot yachts is likely a dead end in the real world. Think how much more valuable and empowering those jobs could have been if the company was at the vanguard of two industry transitions.

    There are many entrepreneurs busy at work all around the world helping drive the transition to more regenerative economies supporting healthy and resilient livelihoods. Spencer Beebe, head of Ecotrust across the river from the shipyard in Portland, Oregon, is one such entrepreneur who writes in the latest issue of Commonplace magazine, “My forty years of conservation work has focused on practical ways to integrate ecology and economics, to promote conservation, while creating jobs.”

    We need more such leadership and “job creation” that regenerates natural and social capital. And please save the rationalization of excessive consumption, which is just the example we don’t need to admire at this time. I can’t think of a better way to bring out the pitchforks than by burning that much fuel as a luxury in the carbon constrained world we are heading into, a world where we must figure out how not to burn 80% of the fossil fuel reserves we’ve already discovered if we are to avoid the worst consequences of climate change.

    But it is not altogether fair to single out Mr. Jones as our whipping boy. We are all, in the developed world, complicit in a lifestyle that, when analyzed objectively, is immoral, given the carbon budget truth we must face up to, and the inequities of our current economic system. This truth hits harder as the assets we have the responsibility to steward grows. All outlets have inescapable consequences, whether the money is channeled into consumption, investment, or philanthropy.

    Welcome to the new meaning and awesome responsibility of financial stewardship in the 21st century.

  • 6 Reasons Why Stock Markets Are No Longer Fit For Purpose

    October 21st, 2013 by John Fullerton

    Another version of this post ran earlier today on The Guardian’s Sustainable Business Blog.

    6 Reasons Why Stock Markets Are No Longer Fit For Purpose: >> Read more

  • How Stewardship Investors Can Drive the Great Transition to Regenerative Prosperity

    April 29th, 2013 by John Fullerton

    We are pleased to introduce this week’s guest blogger, Tim MacDonald, who is joining Capital Institute as a Senior Fellow. Out of his experience as an attorney organizing partnerships in tax-preferred projects like renewable energy and affordable housing, Tim has crafted a model for stewardship investing that we believe has real potential as an alternative to capital markets >> Read more