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Investing on the right side of global change


Wealth Review A Private Wealth Council Publication

Responsible Investing Do good while making money

The concept of Responsible Investing. By Fritz Kaiser.

The world today

G端nter Grass on the period between the nationalism of the last century and the globalization of the new millenium.

The perfect storm

The tragic history of our ailing planet and how we can reverse this course. By Christopher Flavin and Robert Engelmann.

Energy for eternity

Marcel Brenninkmeijer on one of the biggest challenges facing humankind.

The fight against poverty

The economics of micro-credit. By Muhammad Yunus.

No life without water

Peter Brabeck-Letmathe on pricing our most valuable resource.

Investing in the future

Queen Silvia of Sweden on her commitment to drug prevention for children.

Vol. 2

With the generous support of: Kaiser Ritter Partner Holding Vaduz, Liechtenstein Cofra Holding Zug, Switzerland

Publisher: Fritz Kaiser Private Wealth Council Pflugstrasse 12, 9490 Vaduz, Liechtenstein Zollikerstrasse 60, 8702 Zurich-Zollikon, Switzerland

Editorial Since its launch at the World Economic Forum (WEF) in Davos in 2004, the Private Wealth ­Council has devoted itself to better understanding the fundamental responsibility of private wealth owners and how private wealth can be effectively secured and increased. This notion of responsibility shapes the core values of our initiative. We firmly believe we are responsible not just for ourselves and our families, but also for our communities and our global environment. The assets of private individuals can generate long-term healthy returns and at the same time have a favorable effect on society and our environment if they are invested on the “right” side of global developments. Consider the forces that are shaping the global economy – from climate change, energy shortages, rapid developments in science and technology to the current collapse of the global financial system. We need to understand how these forces intersect and influence our lives. Investment decisions must be based on welldefined values and need to be continuously monitored and evaluated in the context of the major drivers of global change. In our second issue of “Private Wealth Review”, we examine the various facets of “Responsible Investing”, with contributions from well-known individuals who support this notion and demonstrate the principles of responsible investing in action. We offer these reflections at a time when we are in the midst of a very serious global financial crisis that has left economic and political leaders struggling to agree on an adequate solution. While the world pins its hope on the newly elected US President Barack Obama, the far reaching hand of governments suddenly juts out, attempting to regulate capitalism. While Europe and the US are desperate to boost their

respective economies at lightning speed, global public investment programs are heading towards the unimaginable total figure of ten trillion US dollars. Little wonder that “Le Figaro” recently choose British economist John Maynard Keynes (1883–1946), a staunch advocate of anti-cyclical deficit spending, as “Man of the Year”. The Dow Jones fell by 33.8 percent in 2008, its worst performance since 1931, while other stock indices tumbled 40 percent, some even more. The triggers for this global financial crisis are widely believed to be a transaction-driven culture in financial markets based on shortrange views and actions and the boundless greed of some players in the industry. During this time, the ten billionaires heading the list of the world’s wealthiest people reportedly lost assets of over 150 billion US dollars within a period of a few months. And now, the party is over. During these sobering times, it is prudent and indeed critical for everyone to reconsider basic values and principles driving investment choices – not only those responsible for private wealth.

Fritz Kaiser Publisher

Responsible Wealth Review – Vol. 2



Investing on the right side of global change

Wealth Review Responsible Investing: Do good while making money

How responsible wealth owners can do good while preserving and growing their wealth in the long-run. By Fritz Kaiser, Founder of the Private Wealth Council. page 4

The world today

Günter Grass is one of the leading German-speaking intellectuals. The Nobel Prize winner for literature reflects on crucial events across the world, from the nationalism of the past century to the unleashing of globalization today. Tea and talk in dim light. page 8

The perfect storm

By the time the scientific community can agree on the effects of climate change, the ecosystem could have irreversibly tipped over. We have the technologies to prevent this. What is lacking is the global political will. A story about the ills of the world and the path leading to recovery, by Christopher Flavin and Robert Engelmann. page 14

Just make money is not good enough

Like nobody else, families with private wealth can combine a long-term investment horizon with their personal values. But what is a responsible investment? A dialogue between Josh Lerner and Fritz Kaiser. page 23

Energy for the world

There is one thing the developing nations of the southern hemisphere have in abundance: sunlight. If we can successfully make this source work for the benefit of humankind, the question of energy is solved. Marcel Brenninkmeijer believes this is a technical challenge similar to the invention of the steam engine in the 19th century. page 26

One laptop per child


When Professor Nicholas Negroponte launched his initiative “One Laptop per Child”, the purpose was a global education project where computers would play a supporting role, rather than representing the ultimate goal. An investment in the future and a project to fight poverty. A look at the current situation by Matthew Keller. page 31 Responsible Wealth Review – Vol. 2

Empowering the Poor with Micro-Credits

It all began with the establishment of Grameen Bank for microfinance in Bangladesh. It is a bank for the poor, owned by the poor, and it invented the system of micro-credits. Global social entrepreneurship is the next step in the fight against poverty, according to Muhammad Yunus. page 35

Valuable water

There is neither a price nor a market for water, according to Peter BrabeckLetmathe, which leads to uninhibited wastefulness. To prevent a global collapse of the water supply, costs have to be fully covered and the price structure must take the financial possibilities of the poor into account. page 38

Eco-city in the desert

Masdar City is being built in Abu Dhabi. It is the first city in the world without carbon dioxide emissions, without waste, without cars. It is intended to become the Silicon Valley of an era of clean technologies, says Dr. Sultan Al Jaber. page 49

Being responsible for our children

The Mentor Foundation is committed to fighting drug abuse of children and adolescents, which is a global battle. A philantrophic initiative and an important investment in the future of all of us, according to Queen Silvia of Sweden. page 53

Measuring sustainability

The concept of ecological and social corporate accountability was developed approximately four decades ago and has been continuously refined, says Ernst Ligteringen. However, what we need now to help investors make decisions are forward-looking sustainability data. page 56

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Responsible Investing: Do good while making money How responsible wealth owners can do good while preserving and growing their wealth in the long-run. By Fritz Kaiser, Founder of the Private Wealth Council.

Al Gore is the former Vice President of the United States and a prominent environmental activist.

Erik A. Brenninkmeijer is the Chairman of Zug-based Cofra Holding.

Fritz Kaiser is the Executive Chairman of Kaiser Ritter Partner Group and founder of the Private Wealth Council.


We live in a time when change is occurring at a pace that history has never experienced before. The Hon. Al Gore offered this opinion in a Private Wealth Council session in 2005, when he presented the challenges of global warming to us. We have subsequently explored this notion in various discussions and scenario workshops in our efforts to understand what the world could look like in ten years. It has always been obvious to us that learning from history and understanding the present are important. However, we have also started to recognize that if you are able to predict future events, the quality of your decisions should improve future results. Such thought-provoking meetings are always stimulating and exciting, even if they sometimes challenge our intellectual abilities when we are digging into a cybernetic dimension of some of the tasks. Today we better understand what responsible wealth ownership means and how good it feels to deliberately take the right path and to think beyond mere financial short-term performance as an investor. It is exciting to exchange thoughts with great people and it helps to produce interesting conclusions on fundamental issues. We have recognized that we are living in a complex world where the drivers of change are all interlinked and able to quickly change our world for the better or worse. Closer examination of our list of the nine drivers of global change – issues ranging from cyber revolution to energy shortage – reveals that we must learn how to navigate on the right side of change in this

Responsible Wealth Review – Vol. 2

fast-moving web of global systems in order to protect the long-term interests of our families. And having understood how everything is interlinked, it becomes increasingly evident that we, as investors, need actively to support the positive development of our society and our planet. Gore’s observation that we are treating our planet like a business in liquidation has made a profound impact on current thinking. Today, more and more people are becoming conservation-conscious and concerned with the environmental legacy we are leaving our children. This shift in perception has galvanized a growing group of wealth owners and thought leaders into action promoting the concept of responsible investing. Not least because many wealth owners and entrepreneurs recognize that having a bird’s-eye-view helps make better decisions in situations where they are confronted with short-term and transaction-oriented thinking combined with a lack of vision. The Private Wealth Council advocates the wealth owner’s point of view when talking about Responsible Investing – a position that often differs from the various players in the investment industry, including banks, asset management companies and funds. There are many inherent conflicts of interest between these two interest groups: private wealth owners might have long-term asset preservation goals and the desire for a fair return on investment while investment managers simply strive for maximized short-term profits to meet cer-

‘wrong side’

Global change

‘right side’

Responsible Investing

Just make money


Make money but do no harm

ESG Compliance*

*Environmental, Social, and Governance

tain benchmarks with their product. The investment manager thinks and acts transaction-oriented while the wealth owner’s beliefs would require more long-term considerations. Looking at the wealth management industry landscape, we can identify three different categories of investment philosophies. The “just make money” type of investor represents, by far, the majority of the investment industry. These investors simply try to generate the best possible short-term return on investment (ROI) for a client and for themselves. Another category are the “make money, but do no harm” type of investors. They factor certain client beliefs into the investment strategy and often apply negative screening methods to exclude businesses with ties to drugs or arms from their investment portfolios. Finally, the “do good while making money” investor is portrayed in the paragraphs that follow.

Do good while making money

Today’s investment industry offers an overwhelming variety of very sophisticated investment products, yet all too often they have a low degree of transparency. Indeed, Social Responsible Investing (SRI) is a growing segment in the investment industry, demonstrating that this thinking represents a real need of wealth owners. SRI suggests a combination of financial, environmental and social returns when defining an investment strategy. Such a strategy may include a wide range of products, from carbon products, pure theme funds, SRI indexes to microfinance and philanthropy. The latter two offer environmental and social returns instead of a financial return. It is worth mentioning here that SRI has proven that they can do as well as the mere profit-driven investments even in the current financial market turmoil. Erik Brenninkmeijer, the chairman of Cof-

high Responsible investment opportunities

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ra Holding, a successful, global, fifth-generation family business, is one of the main forces behind the Responsible Investing initiative. A co-host in many meetings and workshops, he urges us to be on the right side of change: “As private wealth owners we can make choices, each one in our own tradition, culture, industry and environment. We believe that to do no harm is not good enough over time. We believe in choices that lead our investments and activities to be on the right side of change. In other words, making a good return and positive contribution, large or small, to the development of our world and humankind”.

The concept of Responsible Investing

In a nutshell, Responsible Investors aim to preserve wealth long-term, to create value, to receive above-average return on investments in the long run while recognizing their responsibility as investors, not only for themselves and for their families, but also for society and for the environment. The following five main criteria outline what wealthy families and responsible investors should keep in mind when investing:



Define your set of values A set of values can include a wide range of beliefs. You may be ecologically sensitive, reject child labour or attach great importance to your religion or your culture. Whatever your views, defining your own written set of values is an essential element in the briefing for your investment management team.

investor and is a precondition for successfully navigating on the right side of change. Gore’s list of the Drivers of Global Change is appreciated by many, but requires regular updating. The World Economic Forum or the Worldwatch Institute offer a useful general overview, and we see various sources now producing new data relevant to this task.



Constantly monitor the drivers of change Understanding the major developments in the various systems of our fast-moving, interconnected world makes a vital difference for an Responsible Wealth Review – Vol. 2

Make a long-term investment strategy A value-driven investment philosophy with a solid macro-view will have the targeted influence on the overall asset allocation and selec-

tion of investment themes, products and companies within a five-to-ten year profitable and sustainable investment strategy. 4

Select investment managers who subscribe to your values. In implementing a defined investment strategy, you will find it most helpful to have your written set of values and a fair understanding of global trends. These will allow you to select like-minded investment managers who subscribe to your values and support the defined strategy based on an incentive system

that includes a well-defined combination of financial and value-driven parameters.

Photo: Corbis

Responsible Investing: Value creation for future generations.


Monitor the financial and value-based performance of your investment Measuring and reporting is also important for Responsible Investing, but requires more than just the conventionally-applied financial reporting. The long-term perspective as well as the value-based, “extra-financial� criteria need to be included in order to measure and report on an investment in a holistic manner.

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The world today Günter Grass is one of the leading German-speaking intellectuals. The Nobel Prize winner for literature reflects on the events of time across the world, from the nationalism of the past century to the unleashing of globalization today. Tea and talk in dim light. The media has heralded Günter Grass in nothing short of superlative terms. The Nobel Prize winning novelist has been named ‘the country’s supreme intellectual’, by German news magazine “Der Spiegel”, and described as “one of the leaders that has shaped the last 50 years of intellectual development” by Mathias Döpfner, Head of Springer Group, the largest newspaper publishing company in Germany. In conversation, Mr. Grass seems refreshingly uneffected by the media’s praise of his literary accomplishments. On a grey November afternoon, Mr. Grass welcomed us in his office on the top floor of Günter Grass House, a museum showcasing Grass’ literature and visual art, overlooking the city of Lübeck. We sat in a dimly-lit room drinking tea, as the snow flurries dissipated into darkness. Our discussion touched on everything from politics, technology to religion. Mr. Grass offered his thoughts about how the past has shaped the current preoccupations of a globalized world. We asked questions, pondered Grass’ answers, and found that the writer had formed his thoughts around twelve ideas.




“In 1992, I wrote the novel ‘The Call of the Toad’, an amusing, but melancholic love story set in Gdansk where I was born and where everything began to shift and even shatter after the Wall fell. A Bengali man settles in Gdansk and discovers a market niche. He realized the Polish couldn’t afford to take taxis, and consequently taxi drivers were left out of work. He decides to Responsible Wealth Review – Vol. 2

introduce bicycle rickshaws in Gdansk and opens a “rickshaw factory” in the old Lenin shipyard that lies vacant. Mind you, I don’t understand the first thing about automobile production, but I do see that more and more cars are being produced, clogging up cities, and ultimately an alternative has to be created first in our mentality. The alternative must involve not only a transition to environmentally sensible methods of transportation, but bring about relief as well, a kind of deceleration. People can get around in rickshaws at a reasonable speed. This endeavour would also be a meaningful investment because it creates jobs, while remaining a people-oriented business, and ultimately free from growth constraints inherent in our economy.”



“During the course of a lifetime, there are many occasions when one feels that things are simply moving too quickly. This is also true for the life of a writer whose distinguished activity is, of course, to write. I remember when the first computers appeared, fellow writers would say to me increduously, ‘You’re still using an Olivetti typewriter from the fifties?’ And yes indeed, I am. I bought four of them at a flea market years

Self-portrait “With glove, pensive”, etching 1981.

Photo: Günter Grass

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ago. You can’t find them anywhere else. I jot down the first version of my texts by hand at the same speed as I later type them, using four fingers on my Olivetti typewriter. It’s the same pace at which I reflect and think.”



“A computer demands that we produce clean copy instantly. This is an optical illusion and totally superficial. My manuscripts are constantly changing. I add new things all the time and it all has to blend together. The paper has to be completely smeared and smudged with scribbled thoughts and ideas before I start the next version. I need to be able to keep track of my changes. The first version must be within reach when I write the fourth draft. Then I find certain thoughts that I had deleted from the first version need to be inserted back into the fourth version, but perhaps in a different form. This establishes a relationship between the individual versions. A computer, on the other hand, promotes randomness. Everything looks crisp and clean, but the thoughts are unfinished.”





“Progress, like the double-faced Roman god Janus, improves our lives, but causes misery as well. In the 19th century, for example, the introduction of mechanical looms created a disaster in local economies when weavers in the rural villages lost their jobs. ‘The Weavers’ by Gerhart Hauptmann depicts the tragic side of progress.”


“I noticed early on that the forces decribed as globalization have a detrimental impact on local food markets. We started going to Portugal twenty years ago, shortly after the Carnation Revolution. Everything the country produced was sold on the market locally. A few years later, much had

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changed. The produce had been adapted and the small farmers had disappeared from the markets. Even the oranges came from Spain, while Portuguese – grown oranges were converted to juice. They no longer conformed to the European standards because their rinds were too thick. Today we see truck after truck carting food all over the place. We are consuming vast amounts of energy to keep up with the demands of globalization. A case in point: On one of our return trips from Portugal, we stopped in Avignon in the south of France. We discovered a restaurant in a small Provençal village which served these wonderful fried fish I am very fond of. Following the tasty dinner, I asked the somewhat sleepy restaurant owner if he had bought the fish in Marseille. He just laughed and said that the Mediterranean had been fished out. His fish came from the Baltic Sea.”



“One thing I know from experience: If we fail to create an alternative system to the bankrupt political systems, we will end up with what I would describe as an ‘eco-dictatorship’. The communist system is obviously over, a relic from the past, but the capitalist system that has been running things since the eighties, is close to a similar demise. Following World War II, capitalism in Germany was relatively restrained, but since then, we have lost all political competition, and it has become unleashed. That is, after all, what happened during the German reunification: grab it, flatten it, and eliminate the competition. This mentality continues, and, as I said before, we are now threatened with an ‘eco-dictatorship’. Eco in this case has nothing to do with green. We are witnessing an unprecedented number of natural disasters – rising seawater levels causing floods, water scarcity, a changing climate, unmanageable population growth, and famines. The poor

of Africa are trying to make their way to affluent European regions. We have to ask ourselves why they would risk their lives to gain a foothold on the old continent. We have to find the root causes and eliminate them at the source. Sealing up the borders is not the answer.”


New arms race

“When the Berlin Wall fell, there was a surge of hope. The former Social Democrat Chancellor Willy Brandt talked about a peace dividend, which would render a future arms race­ super­ fluous. For a brief time, the future looked bright, but then the first Gulf War broke out and the arms race began all over again. Brandt had written the so-called North-South Report (“To Ensure Survival – Common Interests of Industrial and Developing Countries”) as early as 1980 at the request of the United Nations. He supported a new world economic order. Among other things, Brandt stressed the connection between military build-up and poverty in the developing world. If only a fraction of the money squandered on weapons worldwide in the last few decades had been invested in projects to alleviate this misery, we could have accomplished a lot. Instead, we are on the verge of unleashing another Cold War. We’ve experienced an imperial kind of behavior by the United States and much the same from Russia. These decade-old behavioral patterns are now re-emerging. The Americans must understand that the Russians feel threatened by missile defense systems in Poland or the Czech Republic. Considering they lived through the Cuban crisis, it shouldn’t be a stretch for them. I don’t know whether the new President will summon the courage to abandon this imperialistic, wishful thinking of the United States. Nor am I so sure about his Secretary of State, because Democrats and Republicans alike have displayed this kind of imperial behavior in the past.”





“We are experiencing a subtle disintegration of democracy. Look at what Italy has turned into, and the skill and theatrics of the French President. Such things are always at the cost of democracy. But an even greater danger comes from the powerful and anonymous lobby systems which have sprung up around national parliaments. Let’s not even mention Brussels. This is exactly what fuels the risk of ‘eco-dictatorship’. It would emerge out of a crisis as we approach ecological collapse.”

“There are reasons for terrorism. When Willy Brandt wrote his North-South Report, terrorism did not yet exist. However, he pointed out that overpopulation in Africa and Latin America and a world economic order controlled by the wealthy industrial nations would result in increasing inequality. Developed nations gained access to the markets of the developing world while poorer nations are unable to sell their products on the world market. This inequality was simply accepted at that time and has remained the same. The level of impoverishment eventually affected developing countries right up to the middle class. At which point, disappointment and despair evolve into anger and hatred and create a breeding ground for fundamentalism. This is not only the case with Islam which, by the way, should not be reduced to a tribal conflict between Sunnis and Shiites. Now we are fighting terrorism with police and the use of the military, and as in Afghanistan or Iraq, we are not achieving a thing. Reconstruction programs are necessary and the right thing to do, but the missile attacks launched by America and England, which are said to be accurate, only lead to hatred.”

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“Any religion, not the least being Christianity, has the tremendous, inherent potential to unleash crusade-style violence. The Christians were responsible for the Crusades and this mentality continues amongst fundamental Christians today. Former U.S. President George W. Bush gave us a taste of this. Of course, similar things occur in Islam. But Europe was fortunate to have been prepared during the Renaissance period for the subsequent era of the Enlightenment, which resulted in an almost complete separation of church and state. In Germany, pastoral letters were read out loud from the pulpits as late as the sixties. Thankfully, that’s over now. But now we expect other countries that are still going through this process to democratize immediately, something that took us centuries to achieve. These are unrealistic expectations. Let’s not forget that prior to the Renaissance, Europe lagged behind the Muslim world in most fields of research. During the Moorish occupation, Spain was a leader in mathematics and medicine. We must remain cognisant of this important history, before western Christian civilization can expect from others to switch to democratic systems, while even our own is starting to flounder.”


Günter Grass, German author, sculptor, painter, and graphic artist, is considered to be one of the most important writers of our time. In 1999 he was awarded the Nobel Prize for Literature.



“With the exception of the Civil War, America has not experienced war on its own soil. Americans have only fought their wars in foreign countries, such as Korea, Vietnam, and Iraq. GIs return home feeling utterly confused, finding nobody listening to them. Perhaps they find solace in the countless, large-scale American movies illustrating the drama of those returning home. Nobody is interested in what they went through for their homeland. Whether or not the United States has now reached the end of its lifespan as a superpower will greatly depend on how the European allies shape their relations with the U.S. in the future. Germany, for example, under Chancellor Gerhard Schröder, said ‘No’ to involvement in the Iraq war. Today we have to consider ourselves fortunate that we are not part of this mess. Schröder had good, even personal reasons for his decision. Memories of events dating as far back

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as the World War I era reside within every family in this country. Even great-great-grandchildren are aware that their great-great-grandfather died in Verdun. I know that Schröder kept a photograph of his unknown father who fell in Romania in 1944 on his desk. That kind of loss leaves a mark on a person. It’s no coincidence that it was this particular Chancellor who, for the first time in post-war history, said “No” to the United States, a major ally, and made full use of his country’s sovereignty. We have to find this minimum level of courage in ourselves. We cannot leave it up to the Americans alone to shape the world order, even if they are unwilling to dismiss the notion of being the only superpower.”


Teacher and teaching

“I’ve had a few teachers in my long life. Politically, it was Willy Brandt who, in the midst of the Cold War and against enormous resistance, began to soften the thorny relationship between East and West Germany and started negotiating with Russia and Poland. I was with him on that 7th December 1970 when he knelt before the memorial of the Warsaw ghetto. Brandt had invited the writer Siegfried Lenz and myself to come along. It was a gesture of reconciliation and a symbolic act against the war. Today, we must finally prohibit the sale of weapons. There is no reason to wage war. I say this out of economic necessity. I am not arguing as a pacifist, so don’t misunderstand me. If, for example, violence flares up in an African country or in Serbia, the United Nations mandate must be enforced, even though money spent on arms is never productive. We have to redirect these funds to constructive peace-keeping initiatives – to stop the developing world from sliding into deeper despair and to break out of the circle of hatred and terror. Terror cannot be fought with military power.”

Self-portrait “Self with dead flies”, etching 1992.

Bild: Günter Grass

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The perfect storm By the time the scientific community can agree on the effects of climate change, the ecosystem could have irreversibly tipped over. We have the technologies to prevent this. What is lacking is the global political will. A story about the ills of the world and the path leading to recovery, by Christopher Flavin and Robert Engelmann.


It’s New Year’s Day, 2101. Somehow, humanity survived the worst of global warming – the higher temperatures and sea levels and the more intense droughts and storms – and succeeded in stabilizing the Earth’s climate. Greenhouse concentrations are peaking and are expected to drift downward in the 22nd century. The rise in global temperatures is slowing and the natural world is gradually healing. The social contract largely held. And humanity as a whole is better fed, healthier, and more prosperous today than it was a century ago. This scenario of an imagined future raises a key question: what must we do in the 21st century – especially in 2009 and the years just following – to make such a future possible, and to head off the kind of climate catastrophe that many scientists now see as likely. This question inspires the theme of the Worldwatch lnstitute’s State of the World 2009 report: how climate change will play out over the coming century, and what steps we most urgently need to take now. Something extraordinary happened at the top of our planet in the past three summers. For a few weeks each year – in the final days of the northern summer – a large stretch of open water appeared across the Arctic, making it briefly possible to pilot a ship from the Atlantic to the Pacific without going through the Panama Canal or around the Cape of Good Hope. Never before in human history – not even a million years before humans existed – has it been possible to make that journey. As a barometer of global environmental Responsible Wealth Review – Vol. 2

change, the loss of the permanent ice cap at the North Pole is like a seismograph that suddenly jumps off the charts. For several decades now Earth’s heat balance has been profoundly out of balance. The atmosphere and the oceans are absorbing more heat than they are releasing, and across the planet ecological systems are responding. The changes so far have been almost imperceptible, and even now they appear from the human view point gradual. But don’t be fooled: the changes represented by melting glaciers, acidifying oceans, and migrating species are – on a planetary timescalebreaking all known speed limits. The planet that humans have known for 150,000 years (encompassing the Pleistocene and Holocene Epochs, as geologists describe them) is changing irrevocably thanks to human actions. In 2000 the Nobel-Prize-Winning chemist Paul Crutzen and his colleague Eugene F. Stoermer concluded that these changes are so profound that the world has entered a new geological epoch, which they aptly named the Anthropocene. Changing Earth’s climate is like sailing a massive cargo ship. Tremendous energy is required to get such a ship moving – and its forward progress is at first almost imperceptible – but once it is traveling at full speed, it is very hard to stop. It is now virtually certain that children born today will find their lives preoccupied with a host of complications created by an inexorably warning world. Food supplies will be diminished, and many of the world’s forests will be destroyed. Not

just the coral reefs that nurture many fisheries but the chemistry of the oceans will face disruption. Indeed, the world’s oceans are already acidifying rapidly. Coastlines will be rearranged, and so will the world’s wetlands. Whether you are a farmer or an office worker, whether you live in the northern or southern hemisphere, whether you are rich or poor you will be affected.

Fiddling while the world burns

Like a distant tsunami that is only a few meters high in the deep ocean but rises dramatically as it reaches shallow coastal waters, the great

wave of climate change has snuck up on people and is now beginning to break. Climate change was first identified as a potential danger by a Swedish chemist in the late nineteenth century, but it was not until the late 1980s that scientists had enough evidence to conclude that this transformation was under way and presented a clear threat to humanity. An American scientist, James Hansen of the National Aeronautics and Space Administration, put climate changes squarely on the agenda of policymakers on 23 June 1988. On that hot summer day, Hansen told a U.S. Senate Committee he

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Photo: Gurinder Osan/AP/Keystone

New geological age: street child in Delhi during the monsoon rain of the century in 2008.


Problem of population growth (in billions of people)















Source: GeoHive


was 99 percent certain that the year’s record temperatures were not the results of natural variation. Based on his research, Hansen had concluded that the rising heat was due to the growing concentration of carbon dioxide (CO2) and other atmospheric pollutants. “lt’s time to stop waffling so much and say that the evidence is pretty strong that the greenhouse effect is here.” Hansen’s words, joined with those of other scientists, echoed around the world, and within months the media, the public, and government officials were beginning to consider steps to reduce greenhouse gas emissions, with much of the focus on the kind of international agreements that would be needed to tackle this most global of problems. In 1992 the United Nations Framework Convention on Climate Change was adopted by heads of state in Rio de Janeiro, and in 1997 the Kyoto Protocol, with its legally binding emissions limits for industrial countries was added to it. As the 1990s came to an end the world appeared to be moving to tackle the largest and most complex problem humanity has ever faced. But fossil fuel interests mobilized a counter­attack pressuring governments and creating confusion about the science of climate change. Taking advantage of the inevitable uncertainties and caveats contained in leading climate assessments, a handful of climate skeptics – many of them PhDs with oil industry funding – managed to position climate change as a scientific debate rather than a grim reality. Responsible Wealth Review – Vol. 2

The climate change skeptics had their greatest influence in the United States, putting it at loggerheads with the European Union, which since the early 1990s has been the strongest advocate of action on climate change. In November 2000, in the waning days of the Clinton Administration, climate negotiators met in The Hague with the intention of finalizing details of the Kyoto Protocol, which in principle had been agreed to three years earlier. Two weeks of intense discussions concluded with an agonizing all night session that ended in failure. Distrust and miscommunication between American and European negotiators were at the heart of this historic diplomatic failure – a failure that became more significant a short time later when the U.S. Supreme Court decided that Al Gore would not be the next President of the United States. In the months that followed, many remained optimistic: before his election, President George W. Bush had indicated his support for addressing the climate problem and working cooperatively with other countries. Two months later – under heavy pressure from Vice President Cheney and the oil industry – he executed an abrupt U-Turn, rejecting the Kyoto Protocol outright and throwing negotiations into a tailspin. Europe, Canada, Japan and Russia were shocked into completing and ultimately ratifying the Kyoto Protocol in the following years, but time and political momentum had been lost. More significantly, the unilateral actions of the U.S. government deepened North-South fissures on climate change – a divide that has now become the largest obstacle to progress.

Storm clouds gather

The tragedy of these two wasted decades is that during this period the world has moved from a situation in which roughly a billion people in industrial countries were driving the problems (the United States, for example, has 4.6 per-

Problem of natural disasters




800 600

cent of the world’s population but accounts for 20 percent of fossil-fuel CO2 emissions) to today’s reality in which the far larger populations of developing countries are on the verge of driving an even bigger problem. Global emissions of carbon dioxide from fossil fuel combustion and cement production rose from 22.6 billion tons in 1990 to an estimated 1 billion tons in 2007 – a staggering 37 percent increase. This is 85 million tons of carbon dioxide spilled into the atmosphere each day-or 13 kilograms on average per person. The annual increase in emissions shot from 1 percent a year in the 1990s to 3.5 percent a year from 2000 to 2007 – with China accounting for most of that remarkable leap. Between 1990 and 2008 U.S. emissions of carbon dioxide from fossil fuel combustion grew by 27 percent – but emissions in China rose 150 percent, from 2.3 billion to 5.9 billion tons. More suddenly and dramatically than experts had expected, China and other developing countries are entering the energy-intensive stages of economic development, and their factories, buildings, power plants, and cars are consuming vast amounts of fossil fuels. As recently as 2004, the International Energy Agency projected that it would be 2030 before China passed the United States in emissions. It now appears that the lines crossed in 2006. Accelerating emissions are not the only factor driving increased concern. Tropical deforestation – estimated at 13 million hectares per year – is adding 6.5 billion tons of carbon dioxide to the atmosphere annually. The world’s largest tropical forest, the Amazon, is disappearing at a faster pace as high agricultural prices encourage land clearing. More alarmingly, Earth’s natural sinks – its oceans and biological systems-appear to be losing their ability to absorb a sizable fraction of those emissions. As a result, the increase

400 200 0 1980





2005 2008

Source: FTD

in atmospheric CO2 concentrations has accelerated to the fastest rate ever recorded. Scientists are reticent by nature, and the overwhelming complexity and inevitable uncertainly of the climate problem have led them to produce equivocal and hard-to-interpret studies that have given considerable comfort to those who argue it is too early to act on climate change. In the past year, however, a few brave scientists have cast reticence aside. Speaking in Washington on the twentieth anniversary of his historic testimony, James Hansen had a sharp warning for policymakers: “If we don’t begin to reduce greenhouse gas emissions in the next several years, and get on a very different course, then we are in trouble. This is the last chance.” Climate scientists have discovered a particularly inconvenient truth: by the time definitive predictions of climate change are adopted by scientific consensus, the climate system may have reached a tipping point at which climate change begins to feed on itself – and becomes essentially irreversible for centuries into the future. The loss of Arctic ice, for example, will allow more sunlight to heat the Arctic Ocean, accelerating the buildup of heat and putting the vast Greenland ice sheet at risk. And there are early indications that the rapid rise in Arctic temperatures is thawing the tundra and thereby releasing additional amounts of CO2 and methane. These dramatic changes will affect the entire planet, but the world’s poor will suffer first and suffer most. The latest climate models indicate particularly the vulnerability in the dry tropics, Responsible Wealth Review – Vol. 2


where the food supplies for hundreds of millions of people will be undermined by climate change. Hundreds of millions more who live in the vast Asian mega-deltas will be at risk from rising sea levels and increased storm intensity. Health threats from malaria, cholera, and other diseases that are likely to flourish in a warmer world will add to the burdens facing the world’s poor. The fact that many of the 1.4 billion people who now live in severe poverty already face serious ecological debts – in water, soil and forests – will exacerbate the new problems presented by climate change. When they were released in 2007, the latest findings of the Intergovernmental Panel on Climate Change were taken as an urgent warning of the dangers ahead. But the torrent of scientific data to emerge since then has led some scientists to sharpen their advice. James Hansen and W. L. Hare of Germany’s Potsdam Institute are among those who have concluded that to prevent “dangerous climate change” the goal that governments have already agreed to – global emissions must begin declining within the decade and then fall to no more than half the current level or possibly even to zero – by the middle of this century. This is a tall order indeed. Some would call it impossible. But the resources, technologies, and human capacity for change are all in place. The missing ingredient is political will, and that is a renewable resource.

A new political climate


Over the past few years, political will to tackle the climate problem has grown in many countries around the world. The European Union has committed to reducing its emissions to 20 percent below the 1990 level in 2020 – and to reaching 30 percent if other industrial countries join them in a strong international agreement. And

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the political will for change is building, thanks to the strong base in science and widening public awareness of climate change and its risks. In late 2007, Australians voted out a conservative government partly out of impatience with the Prime Minister’s unwillingness to support the Kyoto Protocol; the new Prime Minister promptly secured its ratification. His first trip outside Australia was to a climate negotiation in Bali, and his government has been working to build a national climate plan ever since. In the United States, climate policy is raging like a prairie fire at the state level. By late 2008, some 27 states had adopted climate plans, and groups of eastern and western states are developing their own regional emissions cap and trades systems. In April 2008, the governors of 18 states gathered at Yale University to proclaim: “Today, we recommit ourselves to the effort to stop global warming, and we call on congressional leaders and the presidential candidates to work with us in partnership to establish a comprehensive national climate policy”. And the US business community is responding as well: 27 major corporations, including Alcoa, Dow Chemical, General Motors, and Xerox, have announced their support for caps on national greenhouse gas emissions. Developing countries are joining in too. In June 2008, the prime minister of India released the much-anticipated National Action Plan on Climate Change. It focuses on eight areas intended to deliver maximum benefits in terms of domestic climate change mitigation and adaptation: solar energy, energy efficiency, sustainable habitat, water, sustaining the Himalayan ecosystem, green India, sustainable agriculture, and sustainable knowledge for climate change. China announced a new climate plan in 2007, and during the course of 2008 continued to strengthen its energy efficiency programs, including a new

Photo: CJ Gunther/EPA/Keystone

incentive system that will promote local officials for their ability to save energy. These advances are welcome. But the world needs to change course much faster. To concentrate the attention of policymakers, a mass global movement is needed to engage in negotiations for a new climate treaty to pick up where the Kyoto Protocol leaves off in 2012. It’s everyone’s planet, after all, and everyone’s climate. There are signs that such a public movement is now growing in industrial as well as developing countries, but it is not yet sufficiently strong or pervasive to counter the vested interests that stand on the other side. One reason, explained perhaps by the novelty of the problem and its roots in principles of physics that few people learned in school, is that climate negotiations are numbingly hard to follow. Outside of a hard-working community of government negotiators, non-governmental or-

ganizations, and academics, most people have little sense of what is happening.

Like a wildfire: debate on climate change policy in the USA.

Ten key challenges

Ten challenges must be met in order to create the world of zero net greenhouse gas emissions that will be needed to achieve climate stability.

1 Thinking Long-Term. Human beings have evolved to be very good at focusing on immediate threats – whether it is wild animals the first humans faced on the plains of Africa or the financial panic that gripped the world in late 2008. Climate change is a uniquely long range problem: its effects appear gradual on a human time scale, and the worst effects will likely be visited on people not yet alive. To solve this problem, we must embrace the future as our responsibility and consider the impact of today’s

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New climate treaty: a vision for a better world?

decisions on future generations. Just as Egyptians built pyramids and Europeans built cathedrals to last millennia, we need to start acting as if the future of the planet matters beyond our own short lives. 2 Innovation. The world needs to develop and disseminate technologies that maximize the production and use of carbon-free energy while minimizing cost and optimizing convenience. (Convenience matters: the ease of transporting, storing, and using carbon-based fuels is among their attractions, not captured in price alone.) An effective climate pact will offer incentives that accelerate technological development and ensure that renewable energy and other lowemission technologies are deployed in all countries regardless of ability to pay the costs. We need to dramatically increase the efficiency with which we use carbon-based energy and lower release into the atmosphere of land-based CO2, methane, nitrogen oxides, and greenhouse gases stemming from cooling and various industrial processes. The opportunities for quick and inexpensive emissions reductions remain vast and mostly untapped.


3 Population. We need to reopen the global dialogue on human population and promote those policies and programs that can help slow and eventually reverse its growth by making sure that all women are able to decide for themselves if and when to have children. A comprehensive climate agreement would acknowledge both the impacts of climate change on vulnerable populations and the long-term contribution that slower growth and a smaller world population can play in reducing future emissions under an equitable climate framework. And it can renew the commitment that the world’s nations made in 1994 to address population not by pressuring parents

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to have fewer or more children than they want but by meeting the family planning, health, and education needs of women. 4 Changing Lifestyles. The world’s climate cannot be saved by technology alone. The way we live will have to change as well, and the longer we wait the larger the needed sacrifices will be. In the United States, the inexorable increase in the size of homes and vehicles that has marked the past few decades has been a major driver of greenhouse gas emissions and the main reason that U.S. emissions are double those of other industrial countries. Lifestyle changes will be needed, some of which seem unattractive today. But in the end, the things, we may need to learn to live without – oversized cars and houses, status-based consumption, easy and cheap world travel, meat with every meal, disposable everything – are not necessities or in most cases what makes people happy. The oldest among us and many of our ancestors willingly accepted such sacrifices as necessary in times of war. This is no war, but it may be such a time. 5

Healing Land. We need to reverse the flow of carbon dioxide from destroyed or degraded forests and land. Soil and vegetation should serve as powerful net removers of the atmosphere’s carbon and greenhouse gases. Under the right management, soil alone could absorb each year an estimated 13 percent of all human-caused carbon dioxide emissions. To the extent we can make the land into a more effective “sink” for these gases we can emit modest levels essential for human development and well-being. Like efficiency, however, an active sink eventually faces diminishing returns. And any sink needs to be secured with “drain stoppers” to prevent easy return to the atmosphere of greenhouse gases when conditions change.

Photo: Jonathon Gruenke/AP/Keystone

6 Strong Institutions. “Good Governance” can be a clinch – until someone needs it to survive. The final months of 2008 laid painfully bare the dangerous imbalance between free wheeling global economy and a regulatory system that is a patchwork of disparate national systems. And if there was ever a global phenomenon, the climate is it. In fact it is not hard to imagine the climate problem driving a political evolution toward global governance over the long term, but given the public resistance to that idea the next most effective climate-regulating mechanism will be the strength and effectiveness of the United Nations, multi lateral banks, and major national governments. New institutions and new funds will be needed, but it could take a major public awakening or a dramatically deteriorating climate to overcome the obstacles to inventing and establishing them.

7 The Equity Imperative. A climate agreement that can endure and succeed will find mechanisms for sharing the burden of costs and potential discomforts. Per capita fossil fuel CO2 emissions in the United States are almost five times those in Mexico and more than 20 times the levels in most of sub-Sahara. An effective climate agreement will acknowledge the unrestricted use of Earth’s greenhouse gas absorbing capacity by the wealthiest and most industrialized countries and the corresponding need to reserve most of what little absorbing capacity is left for countries in development. Most people live in such countries, with little responsibility for causing this problem – though it is worth recalling that wealthy people do live in poor countries and vice versa. 8 Economic Stability. In the fall of 2008 the global economy foundered, raising the obvi-

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ous question: can a world heading into hard economic times add to its burdens the costs of switching from fossil to renewable fuels or managing precious land for carbon sequestration? Any climate agreement built on an assumption of global prosperity is doomed to failure. And as growing and increasingly affluent populations demand more of the resources of a finite planet, we may have to balance the future of climate against present realities of hunger, poverty and disease. A robust international climate regime will need to design mechanisms that will operate consistently in academic as well as booming economic time. And a strong pact will be built on principles and innovations that acknowledge and accommodate the problem of cost while building in monitoring techniques to ensure that efficiency is not achieved at the expense of effective and enduring emission cuts and adaptation efforts. 9 Political Stability. A world distracted by major wars or outbreaks of terrorism will not be able to stay focused on the more distant future. And just such a future focus is needed to prevent future changes in climate and adapt to the ones already occurring. A climate pact could encourage preemptive action to diminish insecurity caused or exacerbated by climate change. But unless nations can find ways to defuse violent conflict and minimize the chance that terrorism will distract and disrupt societies, climate change prevention and adaptation (along with development itself) will take a back seat. On the bright side, negotiating an effective climate agreement offers countries an opportunity, if they will only seize it, to practice peace, to look beyond the narrowness of the interests within their borders at their dependence on the rest of the world, to see humanity as a single vulnerable species rather than a collection of


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nations locked in pointless and perpetual competition. 10

Mobilizing for Change. As fear of climate change has grown in recent years, so has political action. But opponents of action have repeatedly pointed to the vast costs of reducing emissions. At a time of serious economic problems, the power of that argument is growing, and some of those who are persuaded are going straight from denial to despair. The most effective response to both of those reactions is, in the words of former Carnegie Corporation president John Gardner, to see global warming as “breathtaking opportunities disguised as insoluble problems.” Solving the climate problem will create the largest wave of new industries and jobs the world has seen in decades. In the United States, Michigan, Ohio, and Pennsylvania are among the states that have devoted enormous efforts to attracting new energy industries with a glancing reference to climate change and a major focus on creating new jobs to revive “rustbelt” economies. In November 2009, the world faces a test. Will the roughly 200 national governments that meet in Copenhagen to forge a new climate agreement come up with a new protocol that provides both vision and a roadmap, accelerating action around the globe? The challenges are many: Will the global financial crisis and conflict in the Middle East distract world leaders? Will the new US president have time to bring his country back into a leadership position? Will the global North-South divide that has marked climate talks in recent years be overcome?

Christopher Flavin is the President of the Worldwatch Institute in Washington. Robert Engelmann is a staff member of the Worldwatch Institute. This is a slightly abridged version of the introductory chapter “The Perfect Storm” from “State of the World 2009: Into a Warming World”, published in January 2009.

Just make money is not good enough Like nobody else, families with private wealth can combine a long-term investment horizon with their personal values. But what is a responsible investment? A dialogue between Josh Lerner and Fritz Kaiser.

Since Fritz Kaiser founded the Private Wealth

are describing might change due to the financial

for a formula for responsible investing from the

Lerner: It would be fantastic if that did happen and if banks took more of a leadership role in corporate social responsibility, but I am doubtful. Investment banks tend to be transaction-driven organizations; they respond to the ebb and flow of markets rather than making longer-term investments. While this sounds pessimistic, I am optimistic about the ability of longer-term investors, especially wealthy families, to do some of the things financial intermediaries are unable to do. I would also highlight the growing interest from the venture capital industry in environmental and social businesses. The venture capital structure, for example, allows managers to make longer-term investments than mutual funds that face the prospect of daily redemptions. Fritz Kaiser: Listening to you, I think it is fair to say that most financial intermediaries are set out simply to make money for their clients and for themselves. A few may adopt negative screening, excluding certain industries and products from the investment process, and try to make money without doing any harm. However, if we want to pursue the idea of doing good while making money, it seems the driving force needs to be coming from wealth owners that are in a position to make long-term decisions. This assumes that wealth owners have to do their homework and decide what is important to them. Once the wealth owner has his set of values, he can be much more targeted in select-

Council in 2004, the Council has been looking

wealth owner’s perspective and has constantly been asking what it means to be a responsible

wealth owner. When Kaiser mentioned to you that the Council was planning to examine re-

sponsible investing in more depth earlier this year, you felt that this area was highly interest-

ing and that it does not get the deserved attention from industry practitioners. Why do you think so?

Josh Lerner: I would go back to an academic paper published about a decade ago by Andrei Shleifer and Robert Vishny called “The Limits Of Arbitrage”. Shleifer and Vishny pointed out that even if there is an amazingly good investment opportunity over the long-term, it is very difficult for financial intermediaries to take advantage of it because their businesses are driven by short-term considerations. You can see this in the investment banks that have set up carbon trading desks, or environment, social and governance research teams, only to scale back their efforts in the face of short-term financial pressures. Investment banks and financial intermediaries often take steps in the right direction but struggle to sustain their efforts because they are governed by more immediate pressures. In the current financial crisis, particularly investment banks are under pressure to act more

responsibly and with a longer-term horizon. Hence, could you say that the status-quo you


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Photo: Coneyl Jay/SPL/Keystone

Long-term view: Investments for generations.


ing and briefing investment managers and in deciding his strategic asset allocation. Lerner: The actions of the Rockefeller family after World War II present an interesting example of your idea. This family contributed to the rebuilding of temples in Tokyo and also spearheaded real estate development in the city. The Rockefellers were motivated by social goals and an appreciation of Japanese culture while at the same time their effort was a visionary financial investment that few institutions could or would have made. As you have highlighted at the Private Wealth Council, we are in a period of rapid change that presents enormous social challenges but also substantial investment opportunities for those who can take long-term decisions. Often those are families with a multi-generational view of investment. Kaiser: In our gatherings of the Private Responsible Wealth Review – Vol. 2

Wealth Council where we bring substantial wealth owners together, there is always one broad consensus: If we can make investments on the right side of change, then they will be more sustainable and generate better returns. So how do we promote this idea, particularly to the investment industry? Lerner: There are no easy answers to that question but I would highlight four areas that need addressing: First, there is a need for more granular data on private sector activity in investing in social and environmental projects. Good data makes investors generally feel more comfortable with an idea – a trend we have seen in emerging markets, where improved data have tended to prompt increased investment from abroad. Second, there is a need for analytical frameworks. There is actually very little academic

work on socially responsible investing. More smart people need to be examining what works and what doesn’t, and the reasons behind it. Third, we should look at areas of best practice for long-term investing more broadly, as this tends to coincide with success in sustainable investing. Some of the top family offices and endowments haven’t emphasized social goals at all but have concentrated on long-term financial returns with impressive results. How have they succeeded? What are the lessons that others could learn who have a broader set of goals? Fourth, some form of certification or a stamp of approval would be beneficial. Investors need a way of figuring out which institutions being serious about social and environmental issues and which are just covering themselves with a mantle of convenience. You mention that there is a need for more data. Does this mean that social returns need to be quantified and included in common reporting?

Lerner: Perhaps I am not ambitious enough but I think measuring social returns is fraught with difficulty. I had a student team which tried to quantify both the financial and social returns from community development projects. They quickly found that measuring social returns involved an enormous amount of subjectivity. Even getting private returns right in these areas, and taking a first step at capturing social returns, would be a big step forward. Do you think that the current financial crisis will help or hinder the rise of responsible investing?

Lerner: You can make a case that this difficult time is stimulating people to think more deeply about their goals and ambitions. There may be a questioning of the blind pursuit of consumption which many people would regard as healthy. Perhaps people will no longer think

that the meaning of life is to become an investment banker and make millions of dollars. Are you seeing that change in attitude from your students?

Lerner: It’s too early to tell, as I think changes of that magnitude take years or even decades to manifest themselves. There is certainly a growing awareness of the broader context in which businesses operate and more of a desire to do something that makes a difference to society in a profound way. That change has been happening for a few years and I wouldn’t be surprised to see it accelerate. Kaiser: I discussed responsible investing at a roundtable in Beijing last year with a group of academics, politicians, investment bankers and consultants, seeking a Chinese perspective on the idea. One of the participants expressed an interesting view that we were wrong to be looking at responsible investing only through the eyes of wealth owners; we should be looking through the eyes of governments too, as they have a direct responsibility for their citizens. The growing influence of sovereign wealth funds on global markets adds a new dimension to the

idea of responsible investing. Do you see sover-

eign wealth fund investors as potentially influential players in this field?

Lerner: In many respects, sovereign wealth funds have a lot in common with family offices and university endowments as they can take a multi-generational view of investments. Therefore, as significant owners of capital they certainly have the potential to help shape and promote a greater understanding of what it means to invest responsibly. But what excites me most as an academic is that from a scientific perspective this remains a very young field of exploration while the potential is immense.

Josh Lerner is the Professor for Investment Banking at Harvard Business School in Boston. Fritz Kaiser is the founder of the Private Wealth Council. James Rutter, Managing Editor at “Dow Jones Wealth Bulletin”, asked the questions.

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Energy for the world

There is one thing the developing nations of the southern hemisphere have in abundance: sunlight. If we can successfully make this source work for the benefit of humankind, the question of energy is solved. Marcel Brenninkmeijer believes this is a technical challenge similar to the invention of the steam engine in the 19th century. At the beginning of this century, in October 2000, I asked myself whether there were any good reasons to invest in alternative energies. This was a matter of concern to me, because it is precisely what I was planning to propose to Cofra, our family holding company: a substantial investment in solar energy. I knew that this would be a sensitive issue. For one thing, it is a rather unusual idea for a family that has made its money in fashion retail for generations. For another, I knew from experience that our family will only invest, at least in business, if a business case is available. If I intended to receive starting capital from Cofra, a desire to save the world – although quite a worthwhile endeavor – would by no means be enough. I had a lot of convincing to do, backed up by hard facts. And so I presented three compelling reasons in support of an investment in alternative energies. 1


Climate change. I firmly believe that this is creating the most important business field of the 21st century. In the fall of the year 2000 an awareness of this issue was just beginning to dawn. The global dangers of the greenhouse effect had been recognized a mere ten years before. The conference in Rio de Janeiro had been held eight years earlier, and the Kyoto Protocol had been signed in 1997. Consequently, fighting climate change by investing in alternative energies – because they are clean – is helping the planet and opens up a broad range of lucrative business opportunities.

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Energy demand. Two and a half billion people in China and India alone are on the brink of catching up with the industrialized world and dream of having a western standard of living. In global terms, this means that the need for energy will double and as a result CO2 emissions will also be twice as high. A look at the remaining fossil fuels in the world is enough to understand that in the medium and long term such energy demands can only be secured if we use renewable resources. 3 Social tension. The developing nations are responsible for a relatively minor portion of global greenhouse emissions. At the same time, they are affected to a particularly great degree by the consequences of climate change. A shortage of drinking water is threatening the southern hemisphere and a decrease in food production as a result of drought. A global warming of the earth by two degrees Celsius, under a best-case scenario, is expected to cause the sea level to rise by one meter due to thermal expansion of the oceans, and another thirty centimeters because glaciers are melting. In the 21st century, this will lead to more than 700 million environmental refugees. We should expect social tensions, migration of peoples, even political crises and armed conflicts. These would also impact the northern half of the planet. So, if we intend to ensure that our children, our families have a future, we have to think globally, in the truest sense of

the word, and make certain that people in developing nations also have a future. One of the keys is solar energy, photovoltaics, the conversion of light into power, as well as solar thermics, the conversion of heat into power or hot water. Their share of today’s worldwide energy production is still less than one percent. However, nobody will seriously doubt that this must change and will change. The growth rates of solar energy are sharply rising and it is also clear that the mix of energy sources will dramatically change in favor of solar energy by the time we are at the threshold to the next century. As early as 1999, Shell, a mineral oil company, pointed out two megatrends in global energy management: 1. Compared to today, the primary energy demand of the world’s population will quadruple to 1600 exajoules (EJ) by the year 2100, even considering a significant improvement in the energy efficiency factor; 2. The dominant role that fossil fuels, such as oil, gas or coal, are playing in the production of energy, will have reached its peak in the fourth decade of this century. Until then, solar energy will quite literally lead a shadowy existence, but will then actually substitute fossil fuels as they decline. Applied to the entrepreneurial biography of my family this means that five generations of Brenninkmeijers have lived since the establishment of the C&A clothing company in the year 1841; four more will follow by the year 2100. At that time, solar energy will be the most significant energy source in the world by far. More than half of the time between the foundation of our company and the expected market dominance of solar photovoltaics has already elapsed. From an economic perspective, an investment in this

Energy sources: the global mix

Nuclear power 15%

Coal 40%

Renewable energies 18%

Water 16.0%

Oil 7%

Gas 20%

Biofuels 1.3% Geothermal energy 0.4% Solar/Wind 0.5%

Source: Lehman Brothers research, November 2007

Alternative energy sources: projections up to the year 2100 (in exajoules per year)


1400 1200 1000 800 600 400 200 0 2000






Solar/ others Photovoltaics Wind Bio Water Nuclear power Gas Coal Oil


Sunlight as a source of energy

(in hours per day during the month with the least sunlight)

1.0–1.9 2.0–2.9 3.0–3.9 4.0–4.9 5.0–5.9 6.0–6.9 Source:, 2006

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Securing survival: illustration “Healing the World”, created on the occasion of the North-South Report by Willy Brandt in the year 1980.

industry is therefore quite appropriate for an entrepreneurial family, especially if it can successfully establish a strong position as an early mover in this market, which is still highly fragmented worldwide. Armed with these arguments I then faced the decision makers of Cofra and asked for the necessary starting capital. They approved an amount in the single digit millions, and I used the money to establish the Good Energies investment firm in Basel in March of 2001. As the name implies, its goal and its purpose are to invest in good (because it’s clean) renewable energy. The guideline for our investment decisions are our family values, the triple bottom line, or in other words, the 3Ps: People, Planet, Profit, which stand for the following: 1


People. For something to be sustainable it has to be beneficial to people. Therefore, a business must also be able to demonstrate a “social rate of return”. Otherwise we will take a pass. 2 Planet. Protecting our planet’s environment is our business model, so to speak, and our investments should substantially contribute to an “environmental rate of return”. Otherwise we will take a pass. 3 Profit. Without prospects for profit, no investment. A financial commitment must produce a normal return on investment (RoI). If not, we will take a pass. This is also how we interpret responsible investing: an investment in the future of all of us, responsibly selected, to help keep this world worth living for our children and grandchildren. We want to do this by turning it into a business which is financially self-supporting and earns a reasonable return for investors. Under these conditions, Cofra was prepared to invest in the launching of Good Energies. Responsible Wealth Review – Vol. 2

It was a wise decision, because the future promises to be sunny, although the solar industry started out at a modest level and largely still depends on government subsidies to provide initial financing, thus distorting competition in the short term, and on “energy feed-in laws”, which have been introduced in several countries by now. These are typical symptoms of an industry which is on the way to becoming marketable – growing pains, as it were – and it will grow out of these eventually. The number of manufactured solar cells will increase exponentially by the second decade of this century; the market share of solar energy is shooting up at a rate of over fifty percent per year. Investors are now faced with the question: where is the threshold at which the solar industry will be competitive with fossil energy sources and nuclear power? Where is the so-called “grid parity”, the point where the production costs of solar energy will have dropped to the level of household electricity? With the current general installation price for solar power of five euros per kilowatt-hour, this energy source is hardly competitive with conventionally generated power. At this time, this is only the case in a few areas in California with around 1900 hours of sunlight per year. However, a look into the immediate future shows what is possible: the faster solar technology advances, the sooner the cost of solar photovoltaics will drop and the more competitive the production of solar power will become in other sunlight-intensive regions of the world. For example, scenarios for the year 2012 are based on the assumption that the installation price of solar power will fall to three euros per kilowatthour by then, a price which will make the sun a competitive energy source in countries such as Italy. The most likely scenario in the future will then be the following: The trend toward less expensive production of solar power will continue

Illustration: Bill Sanders/Science Photo Library (SPL)/Keystone

and intensify, while fossil energy sources will tend to become even more expensive. As a result, the demand for solar technology will increase, even in countries enjoying less sunlight, such as the Netherlands. This in turn will open up more and more new markets for the solar industry.

Therefore, I do not anticipate seeing an overproduction of solar modules, as some observers expect. Quite the opposite: a global market for solar technology will develop and over time, it will make the industry independent of government subsidies. Responsible Wealth Review – Vol. 2


Significant differences

(GDP per capita by country, 2006, in USD)

No data 30 000+ 20–30 000 10–20 000

5–10 000 3–5 000 1–3 000 <1 000

Source: International Monetary Fund

China in the lead

(carbon dioxide emissions, projections by country, 2000 to 2030) 35 000

30 000 25 000 20 000 15 000 10 000 5 000 0 2000 2002

Source: EIA 2007







OECD Europe Brazil Africa Middle East India China Russia Australia/NZ South Korea Japan Mexico Canada USA

Australia and Canada in the lead

(greenhouse gas emissions per capita by country, 2000)

0 Source: World Resources Institute (WRI)


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93.9 tons CO2 per capita

Looking even further down the road we can envision where we are headed. Today approximately 1.6 billion people on this planet have no access to energy, although this is a prerequisite for prosperity. If we look at the world under the aspect of gross domestic product (GDP) per capita according to country, we will find that it is at least 10,000 dollars in the northern half of the globe, and peaking at over 30,000 dollars in some nations. In the southern hemisphere, the situation is diametrically different: the highest GDP level per capita in some countries is 10,000 dollars at most; in the poorest regions it is less than one thousand dollars. Let’s summarize then: In the north, access to energy is secured and the level of wealth is highest. In the south, this is not the case, and this is why poverty is most widespread there. We can change this equation if we can produce energy out of what the south has in abundance: sunlight. If we were to equip one percent of the Sahara desert with solar cells the energy demand of the world’s population would be covered. The challenge will be to find ways to store this energy and transport it across large distances. For the human race and its growing hunger for energy, finding a solution to this technical problem is about equally important as the invention of the steam engine in the 19th century. We must not and we will not rest until we have delivered proof of the inventive power of our species a second time in the 21st century.

Marcel Brenninkmeijer is the founder and Chairman of the invest­ment firm Good Energies. The firm holds interests in companies producing solar and wind energy in Europe, the United States and in Asia.

One laptop per child When Professor Nicholas Negroponte launched his initiative “One Laptop per Child”, the purpose was a global education project where computers would play a supporting role, rather than representing the ultimate goal. An investment in the future and a project to fight poverty. A look at the current situation by Matthew Keller. There are two simple facts to begin with: Children are the most important resource of any country. And their education is always part of the solution of the problems that especially the poorest countries in the world are facing – whether these may involve war, poverty, disease, or the destruction of the environment. If the level of education of the next generation increases, the chances of improving the standard of living in the medium-term and permanently will also rise. This is basically the only path that can lead to success. The fact that this is a problem of vital importance can be illustrated by a few figures. Every five seconds, somewhere in the world a child dies of malnourishment and poverty. Even today, one billion people have to live on less than one dollar a day. 150 million children, mostly girls, have never attended school. At the Millennium Summit of the United Nations (UN) held in New York in the fall of the year 2000, the General Assembly defined the “Millennium Development Goals” which were adopted by 189 member states. Under item one it says: “Eradicate extreme poverty and hunger.” According to this, the number of people who have to exist on less than one dollar a day in local buying power is to be cut in half between 1990 and 2015, and so is the proportion of people suffering from hunger. Under item two it says: “Achieve universal primary education for all boys and girls.” Both goals have not been achieved so far. In sub-Saharan Africa alone less than 70 percent of the children attend an

elementary school and it is doubtful whether these statistics reflect reality. Some time ago the UN initiated a program called “World Nourishment” with the objective of bringing children into the schools by offering healthful meals there. The relationship between nourishment and learning is evident and this experience has shown that while children walked for miles in the search for food, they did not always find a school, or if they did, the school was often poorly equipped and the teachers were unable to cope. For that reason I tend to disbelieve the statistics, and it appears clear to me that the numbers of children not receiving adequate education are far higher than the numbers which are reported. This is why this question is so crucial: how can we get children to learn? How can we help individuals, communities, and nations to break this vicious circle of poverty and lack of education? What do we have to do to turn the natural curiosity of children all over the world into a desire to learn through play, knowing that this step will foster critical thinking, and this in turn is the way that leads to a better world? The key, and I firmly believe this, is the computer. This is more than just a hypothetical assumption. Together with Seymour Papert, mathematician, Professor of Mathematics and Educational Sciences at the Massachusetts Institute of Technology (MIT), and Nicholas Negroponte, the founder and Chairman of the MIT Media Lab and founder and Chairman of the One Laptop per Child initiative, provided Responsible Wealth Review – Vol. 2



schools outside Dakar with Apple II computers in 1982, and this project in Senegal confirmed what Professor Papert had already found in earlier projects: Children approach computers with great ease and because the machine is interactive, it allows self-experience in learning, which is not possible with the usual direct method of teaching used in schools. Years later professor Negroponte had similar experiences in Costa Rica and Cambodia. In Southeast Asia, they set up schools in very poor villages where the annual average income was not even 50 dollars, and then risked taking another step. They gave an energy-efficient wireless laptop to every child and waited with great anticipation to see what would happen. The children took the computers home, played with them, looked up the results of their favorite soccer teams, and even used the tool as an efficient source of light for the whole family. And they learned their first English word: “Google”. Technology-supported learning, as these experiences have taught us, opens up entirely new channels of communication, even in the poorest, most remote areas of the world. To further explore these possibilities, among other things, the former President of MIT, Jerome Wiesner and professor Negroponte established the MIT Media Laboratory, or MIT Media Lab. It was a small step from there to another project, in which they have been involved since then: “One Laptop per Child” (OLPC). According to our vision, every boy and girl should have a computer. Operating this computer must be – quite literally – as easy as child’s play. It must also take into account the fact that most children in this world live in developing or emerging nations, which are generally without sophisticated and extensive sources of energy, let alone a computer infrastructure. For this reason the non-profit foundation “One Laptop per Responsible Wealth Review – Vol. 2

Child” was established in the fall of 2005. The foundation pursues the following goals: 1

Constructing a platform for learning Developing intuitive, collaborative software 3 Establishing data networks in schools 4 Linking up to the Internet 5 Setting up learning communities 6 Continuously advancing the provided software This brief list illustrates what OLPC is and also what it is not. It is a global education pro­ ject where the computer is an accessory, not the ultimate purpose. When the project was first introduced at the UN Net Summit in Tunis, it was enthusiastically received by UN officals and especially by Secretary General Kofi Annan himself. One of the reasons was that it is an open, non-commercial project with the intent of selling fully functional laptops at cost price to the governments of developing and emerging nations, which are then to be distributed to the children in the schools. One laptop per child. A rugged, energy-efficient computer, which operates with open-source Linux software and can be charged by hand crank. And it has to be produced at a price that the governments of the poorest countries can afford to pay. The target was one hundred dollars per laptop and the experts in the computer industry said “that’s impossible”. We asked ourselves why it should not work. Half of the cost of a modern laptop is attributable to sales, marketing and logistics as well as the profit margins of manufacturers and retailers. All this is eliminated in the OLPC project. That leaves the other fifty percent of the cost which are split up between monitor and computer, memory capacity and power management. It was a technical challenge, without a 2

Photo: Martin Mejia/AP/Keystone

doubt, to build a low-cost, functional monitor, and Professor Negroponte and his colleagues at the Media Lab have actually succeeded in developing one. Computer and power management were fraught with more problems. Only a few years ago, standard laptops used up approximately three quarters of their computing power to support bloated software applications and the operating system. The Founders of OLPC were well aware that they would accomplish their goal only by rigorously slimming down, which meant reducing to a “lean” Linux system and giving up all other technical

options. This is the only way to reach the ambitious goal at all: being able to produce one billion laptops for one billion schoolchildren around the world. In all our work it is important never to lose sight of the bigger picture – fighting poverty with a global and computer-supported education offensive. We are guided in this by five principles: 1

One Laptop per Child: breakfast in Arahuay, a village in the Andes of Peru.

Every child owns his or her own laptop. Ownership means responsibility. It also means that it has to be a low-cost comResponsible Wealth Review – Vol. 2






puter, robust and user-friendly to promote the owner’s interactivity and the dissemination and intensity of knowledge for all project participants. Small children receive a modern laptop. The earlier children come into contact with technology, the easier it is for them as they grow up. It puts them into a position where they show parents and grandparents what the equipment is capable of and teach even younger children to use it. All children are equal. A child with a computer under his or her arm no longer looks exotic, and this is a particularly important aspect in many, especially the poor areas of the world. They all become part of a larger movement of learning. All children are connected. Anybody who is connected benefits from the knowledge of all members of the network. The network is global and allows the children to get in touch with each other across all cultural and political borders. An open, accessible and growing project structure. The OLPC project team in Cambridge, Massachusetts, consists of thirty employees. So far, a total of over 3,000 people around the globe have participated in the development of basic applications and software for the OLPC laptop. And the number is growing because the developments are continuing.

The cost of our computer is still twice as much as the one hundred dollars we targeted for each machine. However, every new generation will be less expensive and this is also absolutely necessary, because for many of the poorest countries in the world one hundred dollars are just as unaffordable as two hundred or perhaps even fifty dollars. This is the reason


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why we are continuously adjusting our distribution model: we are no longer focusing exclusively on the governments of some countries as potential buyers. We also intend to motivate wealthy nations, for example, to support the poorer countries in the purchase of laptops. The US Congress and the Parliament of the European Union (EU) could easily approve funds to buy a laptop for every child in a developing nation. Another model is “give one, get one”, which we have developed together with the Internet retailer Amazon: if a private person purchases two computers, one will go to a child in a developing country. Amazon makes its distribution network available to us at no cost. All this helps to make the OLPC project grow. As of the end of 2008 projects are already underway in Uruguay, Peru, Ethiopia, Nigeria, Ghana, Rwanda, Haiti, Nepal, Afghanistan, India, Sri Lanka to name a few. The government of Peru has pledged to give a laptop to one million children in the poorest regions of the country. Ghana is the first sub-Saharan nation which is able to finance laptops out of its own budget. Mongolia is prepared to order 10,000 laptops for the children of this country. OLPC is in talks with many other governments, and there has not been a single politician, minister, or head of state who did not acknowledge that the OLPC initiative is a sustainable and responsible investment in the future of all of us.

Nicholas Negroponte is a Professor at the Massachusetts Institute of Technology (MIT), co-founder of MIT Media Lab and the non-profit initiative “One Laptop per Child” (OLPC).

Matthew Keller is Director of Europe, Middle East and Africa at OLPC.

Empowering the Poor with Micro-Credits It all began with the establishment of Grameen Bank for microfinance in Bangladesh. It is a bank for the poor, owned by the poor, and it invented the system of micro-credits. Global social entrepreneurship is the next step in the fight against poverty, according to Muhammad Yunus. It was Sufiya Begum who opened my eyes to the realities facing the poor. I met her in the mid-seventies. She was a hard-working woman living in Jobra, a farming village in Bangladesh. She had a remarkable skill for crafting beautiful and practical bamboo chairs. In order to feed her family, she crafted these chairs in the muddy backyard behind her house. Her husband was a day laborer and earned a few cents per day, when he found work at all. Despite all her hard work, the family was dirt poor without any hopeful prospect of their situation improving. Many in Bangladesh shared the fate of Sufiya Begum. The country declared its independence from Pakistan in 1971, following a nine-month civil war. But the effects of war were compounded by a string of natural disasters, famines, and finally the oil crisis in 1973. The liberated nation had turned into a country struggling with bitter poverty. Through my conversations with Sufiya Begum, I began to understand the root causes behind the misery and eventually conceived of a catalyst that could break the cycle of poverty. Like many in the village, Sufiya depended on the local money lender who provided her with a loan on the condition that he could purchase all of her chairs at his set price. Because of this unfair agreement and exorbitant interest rates, her hard work resulted in an absurd income of two pennies a day. I decided to pull together a list of all the victims of money lenders in Jobra and I end-

ed up with 42 names. The total of all loans amounted to 856 taka â&#x20AC;&#x201C; less than 27 dollars. It struck me that twenty seven dollars would be enough to release 42 people and their families from the chains of poverty. I realized the poorest of the poor could be empowered to take control over their lives by simply becoming creditworthy. I was apparently the only one to make this connection. Bankers with whom I discussed the idea politely brushed me off, but I could not stop thinking about it. I offered one bank my personal guarantee for small loans to the poor, and suggested the bank lend the money to me and I would then pass it on to the villagers. The bankers agreed to this plan and the result was astonishing: the poor repaid their loans, without exception, on time. Because of the success of this small initiative, a special bank to underwrite loans to the poor suddenly became a realistic and viable vision. In 1983 we established a bank for the poor, the Grameen Bank, which means the village bank. Today, our bank has 7.5 million loan customers with more than 2,500 branches across the country. More than 97 percent of our loans have gone to women, who, in Bangladesh, are often wholly responsible for raising their children and running the household. The loan default rate is less than one percent. The Grameen system of microfinance works without controlling bodies, guarantees, or lawyers. It works because it is based on the original meaning of credit. Granting credit is Responsible Wealth Review â&#x20AC;&#x201C; Vol. 2



a matter of trust. We know our customers and the businesses where they work. Our customers pay interest, which is a crucial factor. If we were to give them the money at zero interest, they would consider it to be charity rather than start-up aid on the road to an independent life. Grameen Bank is profitable and pays dividends, just like any other bank. The only difference is that the bank not only works for the poor but is also owned by the poor. We soon realized it would not be enough to offer only financial services to the poor, but we had to develop a social agenda as well. When a woman receives a loan from the Grameen Bank, she is held accountable for it on a social level. Every borrower belongs to a group of five friends. She personally selects these friends which cannot be closely related. If one of the five friends wishes to take out a loan, she needs the consent of the other four. Although every borrower is personally responsible for her loan, the group works like a small social network of mutual support for members. This five-person cell is not alone either. A dozen such groups meet once a week at one of the 130,000 centers throughout the country. Each center oversees 50 to 60 Grameen members. During these weekly meetings, an employee from the local bank branch collects the loan installments and accepts new loan applications. Our success encouraged us to expand the bank’s activities. In 1984 we began to offer mortgages, and as a result 650,000 homes have been constructed in Bangladesh. We developed individual savings plans for our customers enabling them to build up reserves for financially more difficult times. We are now also offering education loans, currently allowing 32,000 students to pursue an education. Student loan requests continue to inResponsible Wealth Review – Vol. 2

crease, indicating that a new labor-prepared generation is slowly emerging in Bangladesh. It is a generation that is able to repay their student loans as soon as they have completed their education. The importance of money is obvious. The biggest challenge facing the poor was a lack of credit. None of the banks wanted to provide them with capital to establish their own businesses. Providing micro-credit was a sensible solution to this economic problem. But microfinance alone cannot eliminate all the poverty in the world. However, it can create a stable foundation for other programs and activities with the common goal of achieving better results in the fight against poverty. To increase the Grameen Bank’s reach, we have established approximately two dozen companies promoting social entrepreneurship. Collectively known as the “Grameen Family of Enterprises”, they focus on social welfare and social production while operating in a free market economy. The profits are reinvested to expand the business and reduce the price of the products. This creates growing, sustainable business activity while remaining selffinanced, independent of forced growth, and government or private funding. For example, the umbrella company Grameen Uddog has been exporting handwoven textiles since 1994, while Grameen Telecom offers telecommunication services to the poor and Grameen Cybernet provides Internet services. Grameen Bitek manufactures electronic products, Grameen Health Care Services provides medical care to the poor, and Grameen Danone makes high-quality affordable food products. The above are just a few outstanding examples of successful commitments. Some are close to realizing their social goals, while

others have a long way to go. Some report excellent financial results, but others are still searching for ways to successfully achieve financial independence. Some are very active and rapidly expanding, others are largely idle. All things considered, the group of Grameen companies is not unlike many other business conglomerates. In one aspect, each one of these newly established companies has been a success – their efforts have developed the concept of social entrepreneurship. When we failed, it was generally because we had either over- or underestimated the market, or we were unable to cover our production costs. When we were successful, it was because we were successful in meeting a market need. This is a fundamental requirement for the structure of a successful social enterprise. The joint venture with the French food manufacturer Danone illustrates the possibilities of social enterprise. (I was introduced to Franck Riboud, Chairman of the French food company, during a meeting in Paris. He asked many questions about Grameen and was eager to understand how it all works. I also asked many questions about Danone because I was not familiar with the company. At the end of the conversation, I proposed a social business arrangement to him.) Danone has been producing yogurt for undernourished children in Bangladesh since 2006. We sell the yogurt at a very low price – affordable even to those with very little. When a child eats two cups of yogurt per week over a period of ten months, the symptoms of malnutrition disappear. The company does not make a profit and we don’t pay dividends, but investors will get their investment back over time. Currently, we work with Danone only in Bangladesh, but we have received inquiries from China, India,

and Brazil. Once the pilot operation in Bangladesh has been completed, we will expand into other countries. Joint ventures in social entrepreneurship can also be applied to other industries. We must and we will continue on this path in the fight against poverty.

Muhammad Yunus is an economist from Bangladesh, founder of Grameen Bank and co-founder of the idea of microfinance. He was awarded the Nobel Peace Prize in 2006.

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Valuable water There is neither a price nor a market for water, according to Peter Brabeck-Letmathe, which leads to uninhibited wastefulness. To prevent a global collapse of the water supply, costs have to be fully covered and the price structure must take the financial possibilities of the poor into account. In 2003, Frank Rijsberman, the then-head of the Sri Lanka-based International Water Management Institute, expressed his concern: “If present trends continue, the livelihoods of one-third of the world’s population will be affected by water scarcity by 2025. We could be facing annual losses equivalent to the entire grain crops of India and the US combined.” The message is unusual. Normally, “water scarcity” is associated with tap water – Rijsberman was talking about crops. The dimension of the problem outlined is vast: combined grain production in the US and India accounts for approximately 30 percent of global cereal consumption. But the message, probably, came at the wrong time: in 2003 old people left alone by their families in the summer heat of Paris were dying, and climate change dominated the public debate. The message also indicates that the water problem, local by nature, will become global and will affect even water-rich countries like Switzerland.

Water: different role and value according to when, where and how it is being made available


Water seems to know no limits. In many countries people see their huge lakes and rivers, glaciers and the virtually endless oceans; they are convinced that this is a resource they can use without restriction. Other people will tell you that whatever is withdrawn remains part of an eternal water cycle: falling as rain that fills

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the rivers flowing to the sea, where water evaporates and returns as rain. So, how could there ever be a shortage of water? Nobody would ask the same question about energy; everybody accepts that energy shortage is a reality in many places and a major global risk for the future. But, according to the law of conservation of energy, there is no difference in this respect between water and energy. The law states that the total amount of energy in a system remains constant; energy does not disappear by using it. It merely changes its form, e.g. kinetic energy can become thermal energy or potential energy (i.e., the position of objects in the earth’s gravitational field) and then transform back into kinetic energy. So, like water, the total amount of energy remains the same, it circulates. What matters for both energy and water is you need it in the right form, at the right time, at the right place. It is of little help if Russia has huge amounts of water in the rivers flowing towards the Arctic Ocean if water is increasingly lacking in the affluents of the Aral Sea due to excessive withdrawals for irrigation to grow plants (cotton and other agricultural products). In Northern Russia, where water is abundant, it

Clean water: grandfather and grandson in traditional Japanese water bath.

Photo: Kirchgessner/laif/Keystone

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Increasing water consumption (by sector, per billion m3) 3500 3000 2500


2000 1500 1000


500 0

Household 1900






Source: UNEP, 2002

is still too cold (and probably not enough sun) to grow food. Politicians, then, sometimes talk about projects of huge transcontinental canals – undertakings where investment, maintenance and water losses are so huge that often the “remedy” turns out to be worse than the problem. Water, like energy, must also be available at the right time. In countries with monsoon seasons (covering over 60 percent of the world’s population) average annual rainfall may be very good, but is concentrated within one or two months of the year and not available at a time when the plants are growing. Without adequate reservoirs, rainwater from the monsoon season runs off.

Water shortage: already a reality today


2 3

Igor A. Shiklomanov, 1999, «World Water Resources and their Use: A Joint SHI/UNESCO product». OECD Checklist for Public Action; Paris November 2008, p. 65. UNDP, Human Development Report 2006; New York 2006, p. 99.


Water shortage is for many already a reality today. It may be obvious with some rivers no longer reaching the sea, or invisible with groundwater tables sinking at an alarming speed – in parts of Bangladesh, for instance – to levels where the use becomes dangerous because of the high natural content of cyanide in the rocks at deeper levels.

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There are increasing problems with drinking water – in cities of industrialised countries too. In a comprehensive study, the Organisation for Economic Co-operation and Development (OECD) estimated the investment required to maintain and adapt the water distribution infrastructure in 34 countries – 6 of them emerging economies. As per the study, USD 1040 billion will be needed each year up to 2025; however, the actual spending today is less than USD 580 billion. About 10 percent of freshwater drawn worldwide is for households; amounts are growing rapidly. 20 percent is for industry, more than half of it for the cooling of power plants. The real danger related to water, however, lies with agriculture. Actually, about 70 percent of freshwater drawn for human use goes into farming of foodstuff and other agricultural products. A second type of measurement, considering that some sectors return water clean and re-usable to rivers and aquifers, indicates that more than 90 percent of water used is for agriculture.1 The volumes of water needed for agriculture are enormous; and they must be available close to the arable land, and exactly at the time when plants grow.

Bottled water – an interesting case, but not part of the problem

The basic principle that one litre of water is not just one litre, but is different in its value depending on when, where and how it is made available for human use also applies to bottled water. Somebody who walks in summer up to the Great Wall of China, for instance, will suddenly see in the shadow of one of the watchtowers a bottled water salesman – a safe and efficient source of the urgently needed re-hydration. He may also have some softdrinks, but for the purpose mineral water will be best. The

Thirsty Americans

(average water consumption in liters per person / day, 1998–2002)

600 USA 550

Municipal water and street vendors: some pay, some don’t, and some pay much more

In most instances, both municipal water and water withdrawn for agriculture are still far from full cost recovery (operation, maintenance, capital). The quality suffers, and water users refuse to pay. In some towns of Nigeria,

for instance, actual payments for water services may be less than 10 percent of operating costs.2 In some major towns in Bolivia the invoiced tariff may reach 80 percent of operational cost, but then about one-third of the water is never paid for. Cochabamba in Bolivia – famous after a so-called water war, illustrates the point. Before the war started, only the more prosperous – less than 60 percent of the city’s population – were connected to the municipal pipes. The water tariff they paid – USD 0.1/m³ – never covered the maintenance. The results were frequent interruption in water supply, leakage to the order of 43 percent, and widespread corruption and extortion. At the same time, more than 40 percent of the population, i.e. the poorest without access to municipal water, had to pay an estimated USD 4/m³, i.e. forty times as much, for vended water. The pattern is quite typical. Tap water is being subsidised in many forms. These subsidies are mostly to the advantage of the rich, e.g. with degressive tariffs that make the filling of a swimming pool much cheaper. The 2006 UNDP Human Development Report shows that in Bangalore and Kathmandu, 30–35 percent of water subsidies go to the richest 20 percent of the population, and less than 10 percent to the poorest 20 percent. In both industrialised and developing countries, water tariffs do not even cover the current cost of operation and maintenance. In Chile, with its liberalised economy, only about 2 percent of water subsidies end up with the richest 20 percent of its population, more than 35 percent actually reaches the poorest 20 percent.3 Since the population of Cochabamba was expected to grow from 600,000 people at the beginning of the decade to 3.3 million in 2025, a private company was asked to develop the infrastructure for future water demand, to reduce






Italy Japan Mexico

Spain 300

Norway France





Denmark Germany Brazil Peru Philippines England

Water poverty threshold

price will be quite high, because in addition to the logistic of the water company supplying the bottles down in the valley, the water salesman has had to carry these bottles up to the Wall. The biggest part of the price you are going to pay is therefore not for the water per se, but for the service, i.e., water in the right form at the right place at the right time. Some ad-hoc economists may compare the price you pay for this bottled water with the cost of tap water, complain about the difference and talk about excessive margins. But there are some major advantages to bottled water to be kept in mind. Firstly, there are no subsidies involved, contrary to most tapwater schemes. The infrastructure for bringing the water to this place is fully covered by the price paid by the consumers. Then, there is competition that makes excessive margins impossible, competition between water companies and competition between a large number of water salespersons up on the Great Wall. There is normally no competition between bottled water and tap water – worldwide consumption of tapwater for all purposes (including leakage in municipal water supply pipes) is in the order of 400–600 litres per capita of world population per day, while bottled water measured on the same basis is not more than four or five thimbles full. But any person has the option to walk down to the valley and use the tap in one of the toilets for rehydration. It is a matter of free choice.

India 100 China 50


Bangladesh Nigeria Niger Cambodia Haiti

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4 Geraldine Dalton, Private sector finance for water sector infrastructure; Water Issues Study Group, School of Oriental and African Studies at the University of London; Occasional Paper No 37; London, September 2001. 5 Jean Friedmann-Rudofky, Return to Cochabamba: eight years later; Earth Island Journal Autumn 2008. 6 publications/gcr/download_ gcr#6, p. 44


leakage and to repay the huge debt accumulated by the municipal water supply organisation while it was controlled by the state. In order to fulfil the contract, water tariffs had to be increased significantly (to USD 0.25/m³ for the poorest 42 percent of the population, to USD 0.4/m³ for the 38 percent middle-income population and USD 0.71/m³ for the wealthiest 20 percent).4 The result of a probably too quick increase in tariff was a major revolt, a successful one, with the private investor being kicked out. Since then, the town has become the symbol for all those fighting against private initiative and market mechanisms in water supply. Let me quote the Earth Island Journal that describes realities in Cochabamba today: “After eight years, the levels of corruption are intolerable once again,” admits SEMAPA’s Camargo (SEMAPA is the public water company). Nor has service improved much. SEMAPA’s coverage area has expanded, but water doesn’t necessarily flow daily to all its connections. In the impoverished Zona Sur, even now only two of the area’s six districts are hooked up to SEMAPA. For those who fought the Water War, this regression has been a nightmare – one that’s not likely to end soon.”5 Transparency International has taken a much broader look at the issue: “Lack of access to the public water network deprives the poor of what is usually the cheapest source of water. To fill in the gaps, the poor turn to public standpipes or suppliers that include NGOs and informal water vendors. Very often these alternative providers operate in a legal limbo. Their businesses are insufficiently recognised by the authorities, unregulated and dependent on securing access to bulk water resources through informal means. Being outside the law allows informal providers to charge above public utility rates for water access. A cruel irony results from these circumstances: poor people living in slums unconnected to the water grid frequently pay far more than connected consumers. In Jakarta, Lima, Manila and Nairobi, the poor pay five to ten times more for water than their wealthy counterparts. Residents of Manila without water service rely on kiosks, pushcart

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vendors and tankers to meet their needs. At a cost of USD 10–20 per month, it is more than what people living in New York, London and Rome pay for water.”6 Country studies provide a graphic overview of how corruption hampers the provision of

water services. More than 15 percent of respondents to a national household survey in Guatemala said they paid a bribe when they sought a water connection or reconnection. Extortion in the repair and maintenance services is also common. In Bangladesh and Ecuador, private

vendors, cartels or even water mafias have been known to collude with public water officials to prevent network extension or cause system disruptions. In Mauritania, standpost (e.g. water point) attendants are known to pay bribes to obtain these important community jobs.

Valuable water: Zillergrund in Tyrol.

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7 8 9

10 11 12 13 14

15 publications/gcr/download_ gcr#6 p. 45 COM/ENV/EPOC/DCD/ DAC(2008)4 In the course of the years, these subsidies have clearly increased on the project level as well as on the whole. The Tualatin irrigation project in the US state of Oregon may serve as an example, the construction cost of which amounted to 58.7 million USD. When in 1976 the water could be used by the farmers, they were – according to the experts – only able to pay back 5.9 million USD out of the 31.5 million USD ascribed to the construction of the irrigation infrastructure used by them. The missing amount of 25.6 million USD (81 percent of the costs) had to be paid by other users, especially commercial users of the electricity produced through the project. F. Molle ; J. Berkoff. www.the-world-around-water. net OECD COM/TAD/CA/ENV/EPOC/ RD(2008)15; S. 9. debate/days/view/215 In Delhi where Vandana Shiva lives, the tariffs charged and the actual earnings amount to less than 42 percent of the running costs. Moreover, the city spends almost three times the amount of its earnings on capital investments. Inhabitants who could afford to pay are thus subsidized. Those who are still not connected to the water network (16 percent of the Delhi poor, see “Express India”, 21st July 2008, http://www. delhi-shrinking/33819) purchase their water, as in other poor countries, from street vendors. Furthermore, Shiva’s free-market opponent in the “Economist” debate declares himself to be a “vehement opponent of bottled water” at the beginning. James E. Nickum and Chisa Ogara; Asian Water and Resources Institute: Agricultural Water Pricing in Japan and Korea; OECD COM/TAD/CA/ENV/EPOC/ RD(2998)50; Paris, November 2008; p. 23.


The main alternative to pricing for allocation and re-allocation, particularly in times of shortage, would be water rationing. Transparency International leaves no doubt that this would make corruption flourish even more: “As in most other public works sectors, political corruption also tarnishes water service. Various forms of corruption may lead to policy capture that sways project selection. Politicians may be bribed to divert resources away from improving rural water supply networks and using them in urban areas where influential constituencies are based.”7 A final point: industry pays usually a much higher price than households and irrigators. OECD states that there is often a very large cross-subsidy in the tariff structure between industry and domestic consumers.8

Water in irrigation

The situation with regard to water for agriculture is not different. The infrastructure subsidised,9 and in most instances, tariffs do not even cover the cost of operation and maintenance. In some regions of India, groundwater is free, and so is electricity for the pumps. In Taiwan, Thailand, Poland, Croatia, Vietnam, China and Pakistan farmers may get invoices for amounts that cover between 0–10 percent of the costs for operation and maintenance; in Argentina, India, Egypt and Kenya it might be 10– 20 percent.10 Volumetric pricing is only usual in North Africa, the Middle East, Iran, some parts of USA and Mexico, as well as Australia (more about this later). In many instances the pricing is defined at a bulk rather than at an individual level; there is no metering of water withdrawals. The most common form is an area-based water charge, where a tariff is imposed often per m² of irrigated land. Farmers, as a consequence, do not hesitate

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to withdraw as much water as possible. The result is massive overuse of water since there is no incentive to be water efficient. According to some estimates, 40–70 percent of water withdrawn for agriculture could be saved using existing technology (such as drip irrigation). Another outcome of providing water free of charge: growing plants for biofuels. The rule of thumb is one litre per calorie, whether used for humans or to run cars. But measured in calories, the energy market is about twenty times as big as the food market; replacing 5–6 percent of world energy consumption with biofuels would double water withdrawals for agriculture in one stroke. And with all the support and subsidies for biofuels by 20 or more governments across the world, with water that is virtually free, this dramatic acceleration of water withdrawals with devastating consequences cannot be excluded.

A market price for water

What could be the goals of coherent water pricing? First and foremost, it is about justice. Quoting Nancy Birsdall, head of the Center for Global Development: “Water needs a price. If you don›t have a price, the rich will get it free, the poor will pay a lot”.11 At the same time, there are very practical reasons: An adequate tariff could help mobilise financial resources for maintenance and where necessary, extension of water supply. One further goal, no doubt, would be to create awareness that water has a value, a value that somehow also reflects relative scarcity. Pricing could act as an incentive for more sustainability and more careful use, a price for efficient allocation. In the 1980s, Australia started a major reform of water management, with the development of water markets, not only among farmers, but also between rural and urban users. As a result, in the years

between 1990–1992 and 2001–2003, Australian water use per hectare halved.12 At the same time, the value of water entitlements has increased significantly. Pricing cannot be done in isolation: the political, ethical, and even spiritual dimensions of water need to be kept in mind. We need exceptions for the poorest (but not subsidies for the prosperous), and water must be set aside to protect the environment (wetlands and wildlife habitats). Tradability and markets, as in Australia, seem essential. There is a risk with administered prices and tariffs: any “cost plus” scheme reduces the incentive for efficiency in the water distribution, and when water companies insist that they do not “own” the water, one should not be surprised about the huge leakage losses. The main opposition to water pricing is ideological. A quote from Vandana Shiva, an Indian ecofeminist: “The idea that the management and distribution of and access to a scarce and vital resource like water can be left to the market – and that the market can assign a reliable price reflecting the real value of water – is both absurd and irresponsible.”13 Obviously, she has her own – more urban – insights and interests in this matter.14 Farmers in Oman are of a different opinion; they show us that the Australian approach is not that new and that it is sustainable: their system, called Aflaj, with tradable water rights, is more than 4,500 years old and is still functioning – in a very difficult climatic context. First on full cost recovery: farmers build the irrigation system on their own. Using gravity, water is channelled over many kilometres (the longest: 17 kilometres) from underground sources (shafts up to 20 meters deep) or springs in the nearby mountains to support agriculture and domestic use. The irrigation network is maintained by its

joint owners, i.e., the individual shareholders. Once the water arrives at the village, there is free access for villagers, guests and travellers to get drinking water for free. The canal then goes to the mosque: water is also free for ceremonial washing, and some is set aside and sold to finance the mosque and the school. After that, the water becomes private property in defined shares, days, hours or minutes of rights to use it for irrigation. The rights are inherited, and even more importantly, are tradable. Parts of the water rights can be sold and purchased or leased within the village community. In auctions, sometimes every week, the farmers exchange these rights. If a farmer does not need water temporarily, he leases to another farmer who has additional land available to grow some crop. If a farmer wants to invest in more efficient irrigation, he can finance this investment by selling water rights permanently. Thus water gets a market price, set by those who know best, the farmers. Aflaj is also an illustration for the heterogeneity of water (at the right time in the right form at the right place). The price of the falaj water changes constantly according to the season (with differences of 1:10). It varies depending on water abundance and type of agriculture in each location. Competition among farmers for water, the water efficiency, and market prices of irrigated agricultural products determine water prices of a region, during the year and in each specific period. An interesting aspect of the complexity of water: there can even be negative pricing. In Japan and Korea, a number of studies show the positive externalities of paddy farming. Particularly important: flood alleviation, in Korea for instance, due to 16,000 small irrigation ponds as well as the retaining capacity of bounded rice fields.15 As a result, and in a logic of marResponsible Wealth Review – Vol. 2


ket approach, farmers should be compensated for these services during times of flood, rather than be asked to pay for water withdrawn (beyond cost recovery). Another positive contribution of paddy farming is groundwater recharge (up to 80 percent of the rate of surface runoff).

Water as a human right: special arrangements for the poor


Water as a human right: it is absolutely undisputed. When there is a right to life, there is a right to water since it is essential for life. The Universal Declaration stipulates the basic principles, mainly where the state should not interfere with the citizens’ life. The right to water is of a different nature: it describes the obligation for the state to make sure water is available, i.e., also to set a governance framework that helps avoid depletion. The Human Right to Water therefore does not stipulate that water should be a free good, even to the contrary, it may well be that authorities come to the conclusion that full cost recovery for water services from those who can afford it must be part of the instruments to achieve the goals. Subsidies and other transfers are necessary, e.g., to make sure water remains affordable for the poorest. This can be done, for instance with guarantees for a minimum amount (South Africa) or with vouchers (in Singapore, combined for water and electricity). But full cost recovery as underlying target and principle should not be undermined by pre-emptive political correctness, such as, for instance, in OECD talking about “sustainable cost recovery”, with three equally valid “pillars”: tariffs, tax money and transfers (mostly financial assistance to developing countries). Support measures should be limited in time, and make sure there remain incentives to save water. For the Indian Punjab, for instance, where electricity for the irrigation pumps is free,

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there are proposals that the government offers upfront an amount equivalent to the energy cost, and farmers then pay for the actual use.

Pricing for transparent allocation: within a watershed, as virtual water across borders

Australia shows that markets and undistorted pricing help with an efficient allocation and re-allocation in times of scarcity. It does not go without conflict, and since the system is transparent, everybody knows about these conflicts. But this is by no means a shortcoming of the market, it is in fact to the contrary. In South Africa, the higher marginal cost of desalinated freshwater seems to have influenced the location of water intensive industries – away from the coast. There is also a global dimension to it. Realistic tariffs and some smart pricing mechanism for water withdrawn (such as the one implemented by the farmers of Oman, for instance) could be the basis for a new approach to comparative advantage, with land, labour and water as the main factors for an efficient allocation of agricultural production worldwide. As Oman shows, with this perspective, countries with little water can also be competitive in producing agricultural products. Countries with predominantly rainfed agriculture water, embedded in agricultural products, would get a value, but obviously there would be no price to be paid for rain. Agriculture in Switzerland, for instance, could again get closer to some better competitiveness and help reduce the huge subsidies. Efficiency of this new kind – including water – could of course only be achieved in a globally open market. But over the last two years a new form of bilateralism has spread out. Countries, including Middle Eastern

Photo: Keystone

ones, Egypt, China, Korea, and Japan are investing in large pieces of land abroad (subSaharan Africa, Central Asia, Laos, Burma etc.) – always with the focus on rainfall and/ or the water titles related to it. Since water is free, nobody seemed to take notice. We collected press messages about this kind of transaction – for 2007–2008 more than 100 of them. For about 40 of them the size of the land is defined (it is about twice the total cereal cropland of Germany), and, if calculated on the basis of one crop per year, 55–65 km³ of embedded freshwater. The rigidities

resulting from taking control over water in bilateral deals risk accentuating the looming water-food crisis.

Preserving ecosystems: zebras drinking water in Namibia.

Steering volumes will not work

In 1968, the Czechoslovak minister of the Economy, Ota Sik, described the nature of the problems of a planned economy that mistrusts prices and tries to steer with volumes instead. The story was about sheet steel: targets were set in tons. Quickly, factory managers discovered the easiest way to achieve the targets: keep the sheets as thick as possible. Responsible Wealth Review – Vol. 2


The thinking of steering in volumes is back: a Dutch professor developed the so-called water footprint for goods. Interested readers will learn that one slice of wheat bread is equal to 40 litres of water, an apple 70 litres and a cotton shirt 2700 litres.16 The footprint will provide no actionable information, no clear responsibility and no reference framework for meaningful decisions. According to OECD, water footprints lack the conceptual foundation and breadth required to support policy analysis.17 There is, for instance, no information whatsoever about the value of this water, i.e., no valid basis to compare water embedded in a cereal grown in the USA with fossil water from the Ogallala aquifer or an apple from a rainfed orchard somewhere in Switzerland.

Photo: Keystone


Peter BrabeckLetmathe is Chairman of Nestlé AG. 16 17 OECD COM/TAD/CA/ENV/EPOC/ RD(2008)55 18 debate/overview/133


The water problems are severe, and will rapidly become dramatic if the issue is not taken seriously by politicians, academics, business and the citizens. Water is priceless, with two meanings: as the basis for life on earth; and since it has no price and is considered by many as a free good, to be wasted without remorse. A water crisis seems highly probable – if present trends continue, and worse if present trends towards biofuels are reinforced. This water crisis – by nature a multi-local risk – will become global as a food crisis. But it can still be avoided. There is enough water if we use it carefully and efficiently, even if people in the developing world also eat some more water-intensive meat. Solutions to overcome water scarcity do exist – while there is no single silver bullet, a comprehensive set of measures will help to substantially reduce the problem. Part of the solution is the principle of full cost recovery – with exceptions for the poor and for nature – and an intelligent pricing system – maybe learning

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from the farmers in Oman. Water is too complex for administered prices and administered allocation of volumes. There is another risk, another non-solution: we are living in an age of information, wherein piecemeal projects and symbolic gestures are given too much attention, steps that instead of providing an effective practical solution are rather meant as a bold statement on the problem. Governance and politics have a major role to play. A first step would be correcting sometimes one-dimensional, sometimes rather short-term oriented measures such as the support for biofuels. Growing any plants to be transformed into fuel requires large amounts of water, also for second generation biofuels. Two problems need to be solved: finance and efficient policies for municipal water supply, and water for agriculture. Full cost recovery, property rights of water particularly in agriculture that can be both inherited and traded are part of the solution. Water is probably too complex for management by volumes only; some pricing seems to be indispensable. Administered prices will not work, those directly involved have to find the right price – a price that will differ according to when, where and in what form water is being made available. There are many arguments, and even more emotions. Apparently, even in a free-marketoriented publication like the “Economist”, the apodictic and ideological views of Ms. Shiva opposing any water pricing are being listened to: 56 percent of the readers voted in her favor.18 The debate must therefore continue, and water problems can be solved, must be solved in a comprehensive way. We do not want to see the water and food crisis predicted for 2025 – it would affect people across the world, and most severely the poor.

Eco-city in the desert Masdar City is being built in Abu Dhabi. It is the first city in the world without carbon dioxide emissions, without waste, without cars. It is intended to become the Silicon Valley of an era of clean technologies, says Dr. Sultan Al Jaber. In January this year, the Abu Dhabi government announced a USD 15 billion investment into an alternative energy initiative called Masdar. Why would an OPEC nation with ample oil reserves use its resources to fuel industries that challenge oil’s supremacy? As CEO of Masdar, this is a question I often hear. By now we all understand and acknowledge the critical need to find alternative energy sources. The world’s energy demand is growing much faster than traditional energy supplies, and our hydrocarbon-driven economy as a standalone is universally acknowledged as unsustainable. Climate change will remain one of the main agenda items for all levels of government and business across the globe for decades to come. In April 2008 the International Energy Agency projected that an investment of USD 22 trillion by 2030 is required to meet the world’s rapidly growing need for energy. While there are some inspiring examples of pioneering alternative energy ventures across the world today, they are often under-funded, under-supported by regulators and underrecognized. The moral imperative to invest in renewables is great, but governments should not ignore the economic incentives for driving the development of alternative energy. The total global market for fuel cells, solar, wind and biofuels is forecast to grow fourfold from USD 39.2 billion in 2005 to USD 167 billion by 2015. These are huge numbers. But so are

the potential gains. We are entering a period of huge transition. A period in which only the most ambitious endeavors will succeed. As Ray Andersen, CEO of Interface Inc., has said, “It’s a paradigm shift and in a paradigm shift the early movers win, and the early movers stand to win big. There are new technologies yet to be invented, new fortunes to be made.” These are exciting, visionary times. New innovative forms of energy are part of a revolutionary shift to a more ecological, resilient economy and represent the very best our minds and creativity can achieve. But the task ahead is greater than one company or one government can tackle alone. Finding sustainable solutions to meet future energy demand is a global challenge that requires a global solution. What we are creating in Abu Dhabi, through Masdar, is a global cooperative platform to develop this new energy future for the world. Masdar has grown out of Abu Dhabi’s half century of energy leadership, and is a natural extension of our Emirate’s contribution to global energy growth, development and security. In essence, Masdar is committed to accelerating the development and deployment of new energy solutions. It aims to be a catalyst for making clean energy affordable, scalable and sustainable. It envisions a world where energy is an enabler, a unifying force rather than a divisive one; a world that cannot be Responsible Wealth Review – Vol. 2


held hostage or held back by energy; a world where every academic, every company and every individual can contribute and thrive.

From vision to reality


I am proud to say that today Masdar is involved in every facet of clean energy, from multiple technologies in solar, to wind, geothermal, and carbon management. We are applying scale and capital to drive down the costs of renewable energy because this is the only way to ensure that clean energy and sustainable technologies become a reality in the near future. Perhaps one of our most ambitious and certainly most talked about projects to date is Masdar City, the world’s first carbon-neutral, zero-waste city. Masdar City will be powered entirely by sustainable energy sources, water will be provided through a solar-powered desalination plant and landscaping within the city, and crops grown outside will be irrigated with grey water and treated waste water produced by the city’s water treatment plant. The city will grow to 1,500 businesses and 50,000 residents once construction is complete in 2016. The city is the physical embodiment of Abu Dhabi’s vision. It combines the current thinking on sustainable urban environments with a progressive philosophy that embraces and enables future technological development. There will be no cars in Masdar City. The City will be a pedestrian-friendly environment, meticulously planned so that residents will only have to walk a maximum of 200 meters in any direction to access essential services. When an across-town trip needs to be made, a revolutionary transportation network called a Personal Rapid Transit (PRT) will provide a sustainable and efficient solution. The

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PRT is powered by renewable energy, and will be able to make 150,000 trips across Masdar City each day. To reach our carbon-neutral ambitions, Masdar City will use only renewable energy sources. A photovoltaic power plant will generate most of the electricity for the City. Cooling will be provided via concentrated solar power and water will be sourced from a solarpowered desalination plant. Our zero-waste targets for Masdar City will be achieved through a combination of recycling, reuse and some breakthrough wasteto-energy transformation technologies. Land­ scaping within the City and crops grown outside will be irrigated with grey water and treated waste water produced by the City’s water treatment plant. Through this innovative design, residents in Masdar City will actually consume far less energy than residents of any other city in the world. Masdar City will require only 200 megawatts of power instead of the 800 megawatts normally required by a conventional city of the same size. Desalinated water consumption will drop from 20,000 cubic meters per day to only 8,000. And Masdar City will eliminate the need for millions of square meters of landfill. We have already started work on the city following an official groundbreaking in February 2008. The first phase of the City’s sevenphase plan is the development of the Masdar Institute – the world’s only graduate school dedicated to alternative energy, developed in collaboration with MIT and scheduled to open in September this year. But Masdar City represents more than a real estate development. Masdar City aims to be a Silicon Valley for the clean technology age. Within the City’s walls, leading compa-

Photo: Foster + Partners

nies, researchers and entrepreneurs will live and work to create a community and economy that seeks to develop sustainable solutions to the global energy and environmental challenges we face. We are embarking on a global drive to at-

tract the most innovative clean technology businesses to establish a base in Masdar City. In addition to full-time residents, we are seeking to attract and encourage collaboration between experts in sustainable transportation; waste management, water and wastewater

Masdar City â&#x20AC;&#x201C; the new clean-tech Silicon Valley.

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billion, and Masdar will contribute USD 4 billion of this to develop the city’s infrastructure. The remaining amount will come through direct investments and the creation of various financial instruments to raise needed capital. An essential driver for the development of the city will be carbon finance. Masdar’s Carbon Management Unit will be monetizing the carbon emission reductions achieved in Masdar City under the Kyoto Protocol’s Clean Development Mechanism. While the cost might appear high on the surface, the economic gain that will come from Masdar City far outweighs the initial outlay. The city will create more than 70,000 jobs, and contribute significantly to the local economy. More than anything, I believe Masdar City will be an agent of change. It is a global test bed that will change the face of all future developments. Masdar City is also for everybody, it is a demonstration of what future developments should look like. In our two years we have achieved a great deal. But there is a lot more to do. None of these initiatives will pay off unless we can prove that the possible is practical – and profitable. Our world has moved through the Industrial Revolution and the Technological Revolution and is today on the cusp of an Energy Evolution. We at Masdar intend to lead that evolution.

Dr. Sultan Al Jaber is the CEO of Masdar Abu Dhabi’s Future Energy Initiative.

Photo: EPA/Keystone

conservation, green construction, buildings and industrial materials, recycling, biodiversity, climate change, renewable energy and green financial institutions. We have had phenomenal interest from some of the leading companies, governments and organisations around the world seeking to be part of Masdar City. We have made several trips to Europe, the United States and most recently to Australia to stimulate interest in Masdar. For clean tech companies looking for a new HQ, Masdar City offers an attractive package. The City will be a special economic free zone which will provide local, regional and international businesses a very competitive economic environment. For example, for international companies profits will be 100 percent repatriable. But Masdar City’s value proposition goes well beyond that. Any company in the clean tech industry will be able to partner with us on so many levels. But not just any company will be granted access into Masdar City – we want to work with companies that are developing the future solutions and services in energy and sustainability. This is not a city for companies looking to tick an environmental box. Companies must be committed, passionate and willing to work with others to meet the challenges we face for a clean, green and sustainable energy future. The estimated development budget to build Masdar City is approximately USD 20

Being responsible for our children The Mentor Foundation is committed to fighting drug abuse of children and adolescents, which is a global battle. A philantrophic initiative and an important investment in the future of all of us, according to Queen Silvia of Sweden. Since its inception, Mentor Foundation has envisioned a world that protects children and youth from the physical and mental illnesses caused by drug abuse. Mentor is committed to building up youth who have the confidence and self-esteem to say no to drugs whenever offered; youth who are aware of the dangers of addiction to tobacco, alcohol, and illicit drugs. But too often, the reality facing our youth involves considerable pressure and the interests of drug dealers are certainly ominous. If a young person becomes addicted, the risk of life-long drug abuse is significant. We must understand the effects of drugs on children and youth in order to provide effective preventative strategies. Young people cannot be left to fend for themselves. We must invest in the next generation, for they represent a responsible investment – in the best sense of the word – in the future of all of us. Back in 1993, two World Health Organization (WHO) officials, J. Christer Elfverson and Hans Emblad, approached Stockholm Palace to express their desire to establish a foundation committed to the prevention of drug abuse. Within a year, I initiated the Mentor Foundation in Geneva as an independent, non-profit organization, with close ties to the United Nations. Drug prevention is a grave responsibility that demands international cooperation and expertise. The Mentor Foundation has always had a global focus, and a local reach, support-

ing young people all over the world. If we are to turn the tide on drug use, we must be relevant to the day-to-day challenges facing children and youth where they live. Accordingly, the Foundation has set up a network of “Mentor Nationals”, to involve national and regional mentor organizations that are committed to its mission. We currently have Mentor Nationals in Colombia, Germany, Lithuania, Sweden, Great Britain, and the United States. Mentor Arabia is an umbrella organization representing all 22 Arab-speaking nations from Algeria to Yemen. Regional Mentor branches oversee independent projects, both small and large, that are geared towards the local prevention of drug abuse. Earlier this year, Mentor Arabia held a workshop for Kuwaiti teachers on the topic of “Life Skills for Young People”. Meanwhile, NGOs in Cairo are planning to discuss drug problems plaguing the Arab world. Mentor Colombia has coordinated a network for the children of Latin America (“Red Suramericana de Jovenes”) on behalf of the “Global Youth Network” of the United Nations Office on Drugs and Crime (UNODC), a world leader in the fight against illegal drugs. Mentor Columbia also operates the project “Speak and Learn” (“Habla y aprende”) where trained police officers work with teenagers to open their eyes to the hard reality of drug, alcohol, and tobacco abuse. Mentor Germany offers problem-solving and stress management strategies to encourResponsible Wealth Review – Vol. 2



age self-awareness and independence among youth. The goal is to position young people with self-confidence to overcome peer pressure and say no to drugs when offered. In 2004, the project was awarded the first German Prevention Prize of the Bertelsmann Foundation for its successful efforts. Sweden Mentor runs a program with actual mentors providing guidance and counsel to teenagers from lower-income families. In return, they see first-hand the realities facing young people. The first branch established in the Baltic nations in 2004, Mentor Lithuania has developed a program similar to Sweden’s. Mentor UK provides support to the most innovative and effective projects combating alcohol abuse in Great Britain. The organizations receive generous funding that enables them to continue their preventative work for the long term. Mentor USA is developing a pilot project called “Prevention Online”, which will be gradually expanded and launched globally on Mentor’s website. These programs and activities illustrate the diversity of the Mentor world. It is a community of dedicated supporters and activists. Their efforts are an inspiring reminder of the creative initiatives that flourish when partnered with a global mission in a common goal. Since its establishment, the Mentor Foundation has followed the concept of “Helping the Helpers”. The foundation honors the best practices in prevention with a Mentor Award and then shares the expertise with prevention organizations around the world. An example of sharing expertise is the interactive online program “SmokingZine”, developed in Canada. The program playfully enResponsible Wealth Review – Vol. 2

courages teenagers to make a personal choice not to smoke. Project “Colombianitos” engages children and teens where they are most receptive: the national sport, soccer. The message is simple: real soccer players don’t use drugs. An initiative in England is tackling culturally sensitive issues with “Islamic Choices”. The program is aimed at sensitizing young Muslims to the dangers of drug abuse while providing professional support to their religious leaders on these issues. “Grandparents”, another project in England, offers help to grandparents whose grandchildren are at particular risk because their parents are drug addicts. These are just a few examples that demonstrate the potential for creative prevention strategies. These approaches require expertise. Mentor Foundation depends on an international network of specialists who make up our Scientific Advisory Board. The Board provides expertise that is critical to the success of our programs. One member, Ken Winters, is the Director of the Center for Adolescent Substance Abuse Research at the University of Minnesota and Chairman of the Mentor Foundation’s Scientific Advisory Network. He introduced the Board to findings from recent studies on the human brain. The research uncovered a development process that lasts beyond the age of twenty. As a result, teenagers are more impulsive, more aggressive and emotionally more unstable than adults. They are unable to assess risks at the same level as adults, making them vulnerable to peer pressure and fostering shortsighted thinking and behavior. At this age, a long-term outlook and the ability to weigh alternative actions are less developed. The brain of a teenager is literally still “under construction” – a susceptible environment for drug abuse. Based on the findings, Ken Winters provided two conclu-

sions that are the guiding principles for Mentor’s outreach: 1

Drug abuse is a global phenomenon. According to figures from 2002, 185 million youth over the age of fifteen, just over four percent of the world’s population, are using drugs worldwide. The statistics are disturbing. 3.5 percent consumed cannabis, 0.8 percent amphetamines, 0.2 percent Ecstasy, 0.3 percent cocaine, and 0.3 percent used opiates, in particular, heroin. In the most recent World Drug Report of 2007, Antonio Maria Costa, Director of the United Nations Office on Drugs and Crime (UNODC), points to encouraging developments that indicate a stagnation in the cultivation, production and consumption of cocaine, heroin, cannabis, and amphetamines. It seems the UN General Assembly’s appeal back in 1998 to reduce the supply and demand of illegal drugs within ten years was heeded. However, in his preface to the report, Costa also states that ”while the situation is stable, it remains fragile.” Therefore, we remain steadfast in the fight against drug abuse. The Mentor Foundation is helping young people, because they are most at risk and require the greatest protection.

Photo: PD

Parents must exercise their more advanced ability to judge situations in order to protect their children. Their foresight can help prepare children for difficult decision making. 2 Experimenting with drugs is dangerous. Drugs, particularly alcohol, have a greater damaging impact on young people than on adults.

Queen Silvia of Sweden, President of the Mentor Foundation.

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Measuring sustainability The concept of ecological and social corporate accountability was developed approximately four decades ago and has been continuously refined, says Ernst Ligteringen. However, what we need now to help investors make decisions are forward-looking sustainability data. Developing the means to measure sustainability


The Financial Accounting Standards Board in the United States came into existence as a result of the stock market collapse in 1929 and the ensuing Great Depression. In order to regain trust following the crash, it was felt that greater transparency in providing more robust data was needed. While it seems odd now, prior to this watershed event, the disclosure of companies’ financial positions was not commonplace. Parallels can be drawn to the evolution of corporate disclosure on so-called nonfinancial reporting – what is now commonly referred to as sustainability reporting. Various environmental crises in recent decades have led to increasing demand for transparent data on pollution and resource use. The concept of environmental and social accountability began to emerge in the 1970s and 1980s. Acid rain and holes in the ozone layer galvanized early environmental organizations and led to the first international environmental treaties. World poverty was placed centre stage partly through the emancipation movement in many newly independent, developing nations. In apartheid-era South Africa, Nelson Mandela inspired many to think about the meaning of human rights as a global issue. Awareness of companies’ role in environmental degradation, widespread poverty and abuses of fundamental human rights gave rise to the socially responsible investment (SRI)

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movement in the 80s and 90s. The value of private as well as institutional investments managed on this basis has been growing steadily ever since, now representing trillions of dollars invested globally. It was a group of such SRI firms in the United States who, in the mid-90s, began to discuss how to get better data from companies to inform their dialogue with them and, ultimately, their investment decisions. Driven by this group’s interests, Bob Massie of Ceres and Allen White of the Tellus Institute, both based in Boston, developed the idea of a global framework that would provide a platform for transparent sustainability reporting. Their efforts led to the establishment of the Global Reporting Initiative (GRI). The GRI, although only eleven years old, has already made significant progress in developing such a common framework. As a global network organization, it brings business leaders together with investors, civil society organizations, trade unions, accounting organizations and academics in developing guidance for the corporate disclosure of economic, social and environmental performance. Working groups comprised of these stakeholders meet to outline what the guidance should be.

Transparency: telescope in Owens Valley, California, USA.

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Photo: David Nunuk/Sience Photo Library SPL/Keystone

Their proposals are then opened up to global consultation. In this way, the GRI framework represents the best current thinking on critical sustainability issues facing people, the planet and prosperity. The G3 Guidelines, the GRI’s latest version of the Sustainability Reporting Guidelines, contain guidance for companies and organizations regarding reporting principles and key indicators to measure and disclose economic, environmental and social performance. By enabling the transparent disclosure of sustainability information, the Guidelines provide a basis for comparison between companies and, just as importantly, allow for change to be managed within the company. The Guidelines are made freely available as a public good for companies and other organizations globally, irrespective of size, sector or country. Today, the Guidelines provide the world’s most widely-used framework for sustainability reporting. A survey KPMG released in October 2008, confirms that the G3 Guidelines are the global norm for sustainability reporting. It reveals that nearly all of the world’s largest 250 companies disclose data on their sustainability performance and nearly 80 percent of them use the GRI framework as the basis for their reporting. So why do these companies go through the trouble of drawing up sustainability reports? In exploring the value of sustainability reporting, both the external and internal value to companies should be examined.

Aligning with a growing consensus


The future relevance of business models will be tested by the effects of climate change, the true cost of energy, resource depletion,

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population growth, and the world’s harsh inequities. Public opinion will be a major factor in determining what is acceptable and responsible. Is a company behaving responsibly and acting as part of the solution to their needs or is it contributing to part of the problem? Stakeholder perceptions, which are not static and evolve over time, are critical to validating a company’s reputation and, more importantly, its license to operate. Many CEOs have had sleepless nights as they watched value evaporate due to the loss of public trust in their company and consequently its “license to operate”. Several large apparel producers got on the wrong side of public opinion over labor conditions in their supply chains. Monsanto ran ahead of public opinion over genetically modified organisms and the very company name quickly became a liability. In the mid 1990s, Shell suffered damage to its reputation from being accused of complicity in the execution of Nigerian human rights activist Ken Saro-Wiwa. Wages and conditions at Wal-Mart, the terms of trade for coffee growers supplying Starbucks, the fuelmileage ratio of the General Motors fleet (and the Hummer in particular) are all historic, high-profile examples of corporate strategies at odds with what the public was, rightly or wrongly, prepared to accept as reasonable and responsible business practice. The common denominator in the above scenarios was that the gap between corporate strategy and public opinion had widened, mostly to the surprise of the companies concerned. What was legal and had been accepted as common practice was suddenly questioned. These companies argued the technical or legal logic of their decisions. However, public opinion had moved on and the companies failed to connect with key opinion-leaders.

Today’s principal drivers of changing public opinion are climate change, energy, and demographics. The reality of climate change is widely-known, even though only a select group are aware of Sir Nicolas Stern’s calculation, which, in a report to the British government, predicts that inaction regarding climate change could lead to a loss of up to 20 percent of global GDP. What is recorded in many people’s minds is that we have a systemic problem that requires fundamental change. This latent understanding also exists regarding energy. An understanding that energy is scarce and likely to become more expensive lingers in the public consciousness, as does the notion that this will be exacerbated by the growing world population and the growing needs of large emerging economies like China and India in particular. While many people feel overwhelmed by the scale of the problems and feel helpless as individuals, they do assign responsibility to companies. Whether conscious of the fact that companies make up 51 of the world’s top 100 economies by size, the notion that business is highly influential in shaping not only the marketplace, but also our environment and our society are firmly established in the public mind. Seeing social responsibility or environmental accountability as a political line of reasoning, however, has obscured the fundamental issue, explains Thomas Friedman in his latest book: “Hot, Flat, and Crowded”. In the best traditions of the liberal Enlightenment, a political argument is assumed to have two sides, making it reasonable to propose that both sides of an argument need to be taken into account. Environmental skeptics and industry lobbyists have thus created space for the views of those with an economic interest

in the status quo and in short-term results. Rarely has this resulted in a forward-looking, facts-based assessment of the longer-term sustainability of our way of life. Even scientifically based views, such as that of the Nobelprize winning Inter-governmental Panel on Climate Change, were subject to political negotiations that resulted in projections far more timid than the scientists considered justified. Assessments without a proper evidence-base are risky and when – not if – we experience the consequences of climate change and resulting social upheaval suddenly unleashed, it will be too late for hindsight. Hindsight wisdom regarding the evident market failures that caused the sub-prime scandal and the ensuing global financial crisis will be dwarfed by the insights that commentators display about the evidence of the sustainability risks that are now already so evident.

The need for full-cost accounting

The way we organize our accounts, explained Al Gore at the 2006 GRI conference, conditions our perception of results. Referring to Maslow’s insight that we are likely to see all problems and opportunities as nails if a hammer is our only tool, Gore discussed the consequences of relying on financial data alone to measure a company’s results. The actual value of natural resources and human capital is not captured in the conventional balance sheet, thus leaving major blind spots that negatively affect companies’ as well as the public interest. Making matters worse, our financial accounting is also faulty as explained by Thomas Friedman, quoting environmentalist Lester Brown. As a society we “have been behaving like Enron, the rogue energy giant, at the height of its folly.” We rack up stunning profits and GDP numbers every year, and they Responsible Wealth Review – Vol. 2



look great on paper “because we’ve been hiding some of the costs off the books” and climate change is one consequence. Current accounting practice has become obsolete. Traditional financial disclosures do not capture the true cost of products and services. The information we need to navigate our way towards a sustainable future is hidden. What seems to make short-term economic sense can trip us up in the long-term – as individuals, companies and a society. The narrow perspective of conventional business reporting will inevitably lead to the kind of market failures that can already be seen in the overexploitation of essential, renewable, natural resources like in fisheries or in forestry. Unless we find a way of framing forward-looking sustainability data, we cannot expect to guide the business strategies that will lead to a sustainable future. Financial reporting alone is likely to show increasing profits for companies marketing scarce resources such as oil, for instance. Conventional forms of business reporting will neither give the market, society nor individual companies adequate warning of what is to come until these resources have been exploited to their near end, by which time it will be much too late to prevent major damage and manage a responsible transition to alternative resources. Only by applying a new full-cost accounting model that offers a complete cost / benefit analysis of our private and public enterprises will we be equipped to find our way towards a sustainable future. Changing the way our organizations measure their results will help consumers, employees, and investors adjust their assessment of the terms of a future license to operate. Such measurement will allow us to evaluate what will be of value in our quest for a sustainable and prosperous way to Responsible Wealth Review – Vol. 2

share this earth with nine billion people in a few decades’ time.

Driving value

Disclosing performance on a range of sustainability indicators can help investors assess companies and help owners protect the value of their assets. The gap between the Net Asset Value and a company’s market value is a major blind spot in today’s reporting practice. Research indicates that in 1978, intangibles had accounted for 5 percent of the FTSE 250 market capitalization, a number that increased to 72 percent in 2005. Today financial statements may only capture as little as 20 percent of a company’s market value. Much of the wealth is embedded in the company’s human capital, involving intangible assets such as knowledge, skills, and motivation. Value is embedded in relational capital generated by the company’s network, its ability to partner with others, and the state of its relationships with stakeholders. Increasingly, as we have seen, value is intrinsically linked to reputation and brand capital, which consists of the most intangible quality of all – trust. Conventional business reporting is not well suited to capture many of these intangibles. As public concern over environmental, social and economic sustainability increases, trust will be influenced by the public perception of a company’s behavior with regards to their key issues. Companies that are seen to offer solutions to the needs of our times, such as addressing the clean energy challenge, are likely to be rewarded with enhanced trust. The reporting process can offer an important extra dimension to the day-to-day management and governance of an organization. For the governing board it can provide essential information required to protect the value

Photo: Photopress-Archiv/Keystone

of the company. Management can get a handle on metrics concerning energy and resource efficiency, human resource management, stakeholder relations and product innovation in emerging markets, where regulatory regimes may be weaker. This information can help management and company meet international standards. The very fact that a company is systematically tracking its sustainability performance is often taken as a first proxy indicator for an appraisal of the quality of a company’s governance and management. Sustainability reporting is still a relatively new practice. The GRI’s G3 Guidelines for Sustainability Reporting are updated regularly to integrate advances in the accumulated experience among practitioners. However, this evolution needs to be extended and a key challenge for business directors and investors is to find reliable ways of assessing the effects of sustainability performance on the company’s accounts and its stock price or market value. Our evolving collective understanding of sustainability risks combined with the volatility of market dynamics make the correlation of sustainability performance and market price a complex issue. However, some interesting research is emerging. Most important is the longer-term research into the correlation between a company’s sustainability performance and its stock price. One example is the recently published research by Robeco and SAM Group, research provider to the Dow Jones Sustainability Index, who looked at seven years’ worth of data on companies’ sustainability performance. SAM Group found that picking the star sustainability performers and selling the worst performers would have been a reasonable investment strategy over this period as the top 20 percent outperformed the universe while the bottom 20 percent clearly

underperformed. While no conclusions can be drawn about any cause-effect relationship, their findings are consistent with other research in this area. Research in the nature of the relationship between sustainability performance and a company’s market value, will continue as the pool of data widens, and the first to articulate a reliable method for valuing this link could well be in line to win the next Nobel Prize for Economics.

Information: Swiss weekly newsreel 1940.

Gazing into the crystal ball

Forecasting in today’s volatile market can be risky business. Few people predicted the recent financial crisis. Commentators in the general and business press now excel in hindsight wisdom. Apparently, the market’s shortcomings and risks had actually been known yet not articulated while we were enjoying the benefits of market growth. Few dared or managed to raise an audible voice before the current financial crisis unfolded. Will the same happen when the consequences of climate change, peak oil, water scarcity, population growth, and widespread poverty hit home? When their impacts are no Responsible Wealth Review – Vol. 2


longer just spelled out in long, boring articles but have become a painful reality affecting the marketplace and our daily lives? Will we again satisfy ourselves with 20/20 hindsight and will we then still have time to fix the problem? The encouraging part of the world’s response to the financial crisis is the scale of collective action mobilized by governments and private companies to fix the problem. Does this offer hope for the impending sustainability crisis? Will we see similar concerted action to avert human catastrophe and major market failures? There is no guarantee. The financial crisis shocked the world into action. Yet, the apparently evident failures had not rationally persuaded investors and asset managers to act before the crisis became a reality. The impact of the social and environmental deficits we are now running up is slow to emerge. A sudden shock – a sustainability wake-up call – is unlikely to arrive in time. The effects of our growing deficits on the global climate, energy and human development accounts will emerge throughout the coming decades. We are still doing rather well using our children’s credit cards, as Thomas Friedman puts it. They are the ones who will have to face the consequences of our actions, and they may well wonder why previous generations ignored the writing on the wall. Some wall inscription can be discerned in the pool of sustainability reports produced by a growing number of companies around the world. The quality of their data is not yet perfect as only practice makes perfect; however, much of the information in current sustainability reports can be understood and interpreted with a good dose of common sense. The sustainability challenges ahead not only threaten market value well beyond the scale of the current financial crisis, but also


Responsible Wealth Review – Vol. 2

represent an ethical dilemma: how should the interests of future generations, those who cannot represent themselves in today’s debates, be factored in? Private owners of capital are often more naturally inclined to take a longer-term perspective, bearing future generations in mind. What legacy will they leave behind, when they pass on their assets – assets that often have been built on the efforts of previous generations? Private asset owners can ensure that the companies they own as well as their suppliers track their sustainability performance while ensuring these companies’ long-term value. They can ensure that sustainability performance data is regularly reported and reviewed at board level. Investors can ask for sustainability performance data from prospective investment targets, making it clear that they expect transparent and reliable sustainability reporting to be available. The response to the request for sustainability data provides investors with an early indication of the extent to which the company seeks to manage major factors that influence its value and its future relationship to evolving expectations. Does the company have its sustainability radar screen switched on or is it navigating blindly? Further information about sustainability reporting and the Global Reporting Initiative can be found at

Ernst Ligteringen is Chief Executive of the Global Reporting Initiative (GRI) in Amsterdam.

Editor-in-Chief: René Lüchinger, Lüchinger Publishing, Zurich Design and realization: BBF, Basel Photography: Roland Korner, Close Up AG, Triesen Translation: CoText, Zurich / BBF, Basel Printed by Werner Druck, Basel Printed on FSC certified paper March 2009

Responsible Wealth Review Vol. 2  

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