Reducing impact
Active management sometimes means leaving the parade and running into burning buildings.
As long as managers are prepared to see the big picture, and where necessary move away from the comfortable consensus, they will fuel the accelerating change in corporate behaviour.
Yes, everything is still far from being perfect and the road ahead is very long and very difficult.
But money talks. Managers can use their selectivity by requiring corporate managements to accelerate their rate of change and by nurturing the new technologies and industries we will need in a less impactful and more inclusive world.
Look at what has been achieved already. Data gathered by the UN Framework Convention on Climate Change shows EU states cut their greenhouse gas emissions by 2.1 per cent in 2018 compared to 2017.
While greenhouse gas emissions in the EU were still 4.4bn tonnes of CO2 in 2018, that is 23.2 per cent lower than in 1990.
Over those 28 years, emissions per EU citizen fell from 12.2 tonnes CO2 per year to 8.9 tonnes CO2. The EU reduction without the UK was 20.7 per cent.
How was this done? Two-thirds of the 2018 emissions were in the power generation sector, with coal burning falling by nearly 50m tonnes and renewables increasing.
This data proves that lowering carbon emissions does not have to harm the economy. For each euro generated in the economy, the EU emitted 277g of CO2 in 2018, compared with 582g CO2 per euro in 1990.
The only way a company can grow in a sustainable manner is to treat all stakeholders fairly and by doing this, creating more future value and profit, effectively growing the revenue pie for all stakeholders.
We expect that pressure will remain on companies to keep dividend payouts and executive remuneration conservative, as they do their bit to help stakeholders and wider community actions.
There will never be a consensus on the exact application of ESG policies. To expect one is unrealistic and would require a rigidity that would not serve the cause as thinking and technology develops and changes.
Recent months have shown that sustainability and outperformance yet again can move ahead in tandem.
The challenge for the years ahead is to make certain that those with discretion and financial influence – everyone entrusted with managing another person’s savings – work to make sustainability and outperformance a life-long marriage.
Covid-19 has demonstrated the value of enlightened business management in cold hard cash. The lesson is there for us all to see.
Maxime Carmignac is managing director of Carmignac UK
