Trial run for sustainable capitalism?

The investment strategy behind Al Gore’s Generation Investment Management is a simple one centering on sustainability as the key to long-term success. Far from rejecting capitalism, the company is touting a new version of it; one where socially responsible practices enhance, rather than hinder, long-term prospects. 

The Atlantic’s James Fallows thus explains Generation’s philosophy in practical terms: “Warren Buffett considers Coca-Cola a wonderful long-term value proposition, because of its decades-long track record of worldwide success. By Generation’s standards, it is distinctly unsustainable, since obesity problems in all of its leading market countries will, in the firm’s view, inevitably do to the soda industry what public-health concerns have done to Big Tobacco.”

According to Gore, the sustainable-capitalism model not only reduces the environmental and social damages caused by modern capitalism, but it does so while yielding healthy profits.

That part of the equation is at odds with the conventional wisdom that “the highest returns go to those who are unencumbered by sustainability or other environmental and social constraints,” as Carlyle co-founder David Rubenstein puts it. Yet the numbers seem to be telling a different story: Generation’s 10-year average ranked as No. 2 in a Mercer survey of more than 200 global-equity managers, and its global-equity fund was found to be among the least volatile. Academic research is also lending credence to the model’s viability, with a large-scale Oxford University study recently concluding - based on its assessment of 190 academic studies and news reports - that “it is in the best economic interest for corporate managers and investors to incorporate sustainability considerations into decision-making processes.”

Where attention to long-term social and environmental outlook has traditionally been viewed as a strain to the bottom-line, the people at Generation contend that their approach actually works “in the service of long-term greed.” Or as Gore explains it: “Our goal is to show that sustainability is a ‘best practice’ for doing this, and thus for changing the culture of the investment marketplace. I know that sounds pretty grandiose, but it’s our aim.”

-- Clara Shen

Corporate longevity

Sustainability and the art of the deal