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  4. Why the impact revolution will deliver better returns with Sir Ronald Cohen

Why the impact revolution will deliver better returns with Sir Ronald Cohen

Sir Ronald (Ronnie) Cohen is a preeminent philanthropist, venture capitalist, private equity investor, social innovator, and impact pioneer who is driving forward the global Impact Revolution. He’s also chairman of the Global Steering Group for Impact Investment and The Portland Trust, the Impact Weighted Accounts Initiative at Harvard Business School, as well as co-founding Apax Partners.

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7 min read

For nearly two decades, Ronnie’s pioneering initiatives in driving impact investment have catalyzed a number of global efforts, ensuring private capital serves social and environmental good. All of which has been leading towards what he calls the Impact Revolution.

What is the impact revolution?

“If the tech revolution was driven by entrepreneurship, innovation, and the creation of a professional venture capital and private equity industry, the impact revolution is driven by a huge change in values away from creating damage to our environment and to our society, and to actually bringing solutions through business and investment.”

Thanks to the huge leaps in technology, artificial intelligence, and machine learning, says Ronnie, it’s enabled us to bring impact globally in ways that humanity could never contemplate before.

Also, says Ronnie, the fact that technology today enables us to measure in a very granular way, and to express in monetary terms, the impact a company creates, shows just how forceful impact transparency is.

“The impact revolution, like the tech revolution which preceded it, is causing huge disruption in business models.”

Just look at Tesla, says Ronnie, this is a fine example where optimizing risk return and impact, which is the basis of the revolutionary idea, has enabled a brand new company to become a leader in a 100 year old industry, and to not just lead, but to turn the whole industry toward electric vehicles.

“We’re going to see the same thing happening not just in fossil fuel based industries, but in finance, in construction, in every single sector.”

How to accelerate the translation to impact economies

The big acceleration toward impact economies is imminent, predicts Ronnie, within the next three to five years. The International Sustainability Standards Board (ISSB) under the umbrella of the organization that regulates financial accounting across the whole world (except the United States), is establishing standardized metrics for environmental and social impacts.

They’re insisting on mandatory disclosure of all environmental impacts for companies including supply chain impact. And in the EU, they’re imposing transparency on investment vehicles, forcing every investment manager in the world looking to access the European market to conform.

“This is what is going to accelerate the transition to what I call impact economies, where business and investment seeks to achieve not just the balance between risk and return, but the balance between risk, return and impact.”

These standards, adds Reynir, will allow you to essentially compare apples and oranges. The impact revolution is going to show you how future proof your portfolio really is – it’s going to affect valuations of many companies. And if you don’t have a good understanding of what is impacting your portfolio, you’ll have no clue how future proof it is, nor what your returns are going to be going forward.

“The name of the game has changed away from just looking at impact as risk, to looking at impact as a way to uncover investment and business opportunities.”

Businesses that don’t understand they need to be part of a positive solution, says Ronnie, are not only missing a huge opportunity, they’re facing a big risk.

Bringing finance to social entrepreneurs

At the age of 60, Ronnie received a phone call from the Treasury in the UK asking him to lead the task force to look at how the UK deals with poverty. The task force went on to publish a paper that basically said ‘we don’t do a good job of dealing with social issues that arise from poverty because we rely on government and philanthropy only.”

This was at a time when finance was becoming more readily available for entrepreneurs looking to create new technologies to improve themselves and the world around them. Now, says Ronnie, is the time to bring finance to social entrepreneurs who want to improve the lives of others.

Upon leaving the task force in 2005, Ronnie set about releasing unclaimed assets from bank accounts to create the Social Investment Bank, leading to the concept of social finance, which resulted in the social impact bond – the first security in history where the return depends on achieving social improvement.

“Today, we have $1.4 trillion in sustainability linked bonds and loans, where the rate of interest the company pays on the demand or its debt is reduced as they achieve certain environmental or social targets.”

From social investment to impact economies

In reality, says Ronnie, the impact revolution began in 2000 with the advent of social investment, because in order to access capital, transparency was required on the impact. And that transparency transforms everything. It transforms the valuation of companies, it enables governments to tax companies directly for the carbon emissions or other social ills, or to provide incentives directly. It even opens the door for entrepreneurs to identify industries that are creating negative impacts and disrupt them as Elon Musk, through Tesla, did.

And this is beginning to happen in every sector. It truly is a revolution, says Ronnie. It’s going to lead to a change in investment portfolios and the way private equity companies do business.

Don’t confuse impact investing with philanthropy

One sticking point, says Ronnie, is the persistent mindset that you have to make a trade off between impact and returns. Why? Because people confuse impact investing with philanthropy.

With philanthropy you give your money away. So clearly your return is non-existent. And people mistakenly think that if you’re trying to blend philanthropy and investment, you’re going to make less of a return.

But the truth is, says Ronnie, impact investing isn’t blending philanthropy and investment, impact investing is simply a new way of investing that delivers better financial returns, because it’s consistent with changing consumer preferences, utilizing new technologies.

So, how do you get people to commit to impact investing quickly and embrace it for the long term?

“I see the new generation of entrepreneurs bringing impact into their business plans. They are the ones who aspire to build the most disruptive companies. So they are in the know, they’re saying, ‘we are going to use impact today to achieve higher growth and higher profits, and the leadership position very often in a new field’.”

Make impact the center of your focus

If you want to be an entrepreneur, advises Ronnie, bring impact to the center of your business model. So the more profit you make, the more impact you’ve delivered. If you want to work for a big company on the other hand, pick a company that has values consistent with yours, then do your best to deliver the maximum impact. If you want to go into government, then push for the measurement of outcomes. If you join a philanthropic foundation, then focus on measuring outcomes and begin to use Pay for Success and get the endowment of your foundation to invest in a way tha ist consonant with your grant giving policies.

The world is changing, says Ronnie, and if you’re young, you want to be on the crest of this new wave.

“When I was 22, or 23 at the Harvard Business School, I sensed that something was in the air. Technology and entrepreneurship weren’t considered capable of overtaking big businesses, but I felt differently. I feel the same thing today.”

Right now, says Ronnie, change is connected with the environmental and social issues we face. Young people are scared by the potential outcomes of continuing down the road we’re traveling, and so they are leading a change in consumer preferences.

“If you want to be an entrepreneur today you need to make the most of the opportunity before you; you have to be conscious of this change, and bring impact into your business model.”

Ronnie’s advice to young entrepreneurs? Start young, think big, and stick with it.

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  4. The only mistake is being afraid of making mistakes

The only mistake is being afraid of making mistakes

Amy Edmondsen, Novartis Professor of Leadership and Management at the Harvard Business School, has recently written a new book coming out this fall: The Right Kind of Wrong: The science of failing well. Why? Because in our modern world, it really matters that we learn to navigate failure.

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8 min read

“We live in a time of increasing uncertainty and interdependence. Either one of those factors creates the inevitability of some failures along the way. So we have to learn to manage them and navigate them.”

And the quickest way to do this, says Amy, is to not only learn to prevent preventable failures, but also to embrace non-preventable failures, for the lessons they bring.

The difference between mistakes and failures.

Mistakes and failures aren’t the same thing, says Amy. The terms may be used interchangeably, but the difference between mistakes and failures is a really important one to grasp:

A failure is anything undesired, it’s an outcome that deviates from what you want it to be.

“Some failures are caused by error, but many failures are not, many are caused by uncertainty or an inability to predict the future in some way, which is uncertainty.”

A mistake or an error, on the other hand, implies that there was a right way to do something – a formula, a process, a procedure that exists to produce an outcome that we’re seeking.

“The only thing I can say for sure about a mistake is that it wasn’t deliberate. As soon as it’s deliberate, then it’s something else. It’s a violation. It’s sabotage. But a mistake is something that goes wrong, that could have gone right.”

Failure can be strategic

Failure, says Amy, can be an opportunity for progress and innovation, it can be strategic,

“I would venture to say you cannot get innovation without some failures along the way. So failure is a more encompassing category, because a mistake is a failure. But a failure is not a mistake.”

There are three kinds of failure, according to Amy: basic, complex and intelligent. Intelligent failures are the ones that are absolutely essential for innovation, for progress into new territory.

They’re the ones we have to train ourselves emotionally to embrace, says Amy. We need to be able to welcome intelligent failures as useful discoveries that help us make progress toward valued goals.

The need for psychological safety

One of the key reasons to differentiate mistakes from failures, is that while some mistakes do produce value, most don’t. The most important thing about making mistakes and experiencing failure, says Amy, is you need to have a culture that welcomes the truth, that embraces people for telling you what’s really happening.

“Psychological safety describes an environment where people feel absolutely unconflicted about telling the truth, where they just know that as hard as it might feel right now, speaking up openly, honestly, quickly, is welcomed and valued. That’s the way you turn mistakes and failures into value going forward.”

And how we communicate with each other in a truthful, constructive way, is essential as well. Being able to give and receive feedback, both good and bad, is such a skillful thing to be able to do. But most of us haven’t been trained in this skill; we’ve been trained inadvertently in the skills of face saving, and being nice and withholding what we really think. We haven’t been trained in the skill of directness.

Learn the ladder of inference

Directness doesn’t mean you simply tell someone they’re a jerk, that’s not helpful, says Amy. And it’s not data driven. The skill part is to walk down the ladder of inference. Our brains will naturally want to jump from directly observable data to conclusions, to abstractions, but these high level abstract conclusions aren’t the whole truth. They’re just your conclusion, your view, your opinion. And while it could be a valid view, it’s incomplete.

So in order to have honest and direct conversations effectively in ways that help each other, we have to learn essential communication skills. And the way to do that, suggests Amy, is to walk down the ladder of inference, trying to recreate as best we can directly observable data behaviors that lead us to our conclusions, while also applying the skill of effective inquiry.

What does that mean? It means rather than just coming at everything with, well, this is my truth, and therefore you must listen to it, rather saying, here’s how I see it, what am I missing?

“By learning how to be curious, the chances are very good that that behavior that someone else is engaging in, that you don’t think is effective, makes sense to them.”

How to increase organizational psychological safety

To increase psychological safety in the workplace, says Amy, the first thing to do is call attention to aspects of reality that you all intellectually know are there, but emotionally don’t recognize – uncertainty and interdependence.

Call attention to these explicitly at the beginning of a project, says Amy, for example, say something like: “We’ve never done a project like this before.” Name it, let everyone on the team know you’re all standing in new territory and no one has a crystal ball. Tell them that you’ll be doing things that might work out great, and some things won’t. But the sooner everyone hears about them, both good and bad, the better.

The next thing you need to do, says Amy, is invite input and inquiry. Tell your team to ask good questions early and often.

“The funny thing about psychological safety is if I feel reluctant to speak up, it’s so easy to stay quiet, so I will. But when asked a direct question, suddenly it feels incredibly awkward to stay silent, I couldn’t do it.”

Finally, continuously monitor the responses and thank people for speaking up.

Right kind of wrong: The science of failing well

We live in a world where failures of all kinds are inevitable, and people really struggle with perfectionism, or struggle with the desire to be thought well of by others, says Amy. And we’re under the illusion that if we do something wrong, at any point, people will like us less or love us less. And that’s terribly crippling to the goal of innovation and learning.

The reason we don’t navigate failure effectively, says Amy, boils down to aversion, confusion and fear. We don’t mind failure associated with other people, we just don’t like it associated with us. Aversion is instinctual. Confusion comes from not being able to distinguish between mistakes and beautiful scientific discoveries that came from them. And fear comes from a lack of psychological safety.

Why growth mindset is helpful in navigating failure

“I’ve often thought that psychological safety and growth mindset are partners. The individual growth mindset thrives in a psychologically safe environment and a psychologically safe environment helps people develop their growth mindset.”

But for many of us, the concept of celebrating failure just doesn’t sit well with us, so, suggests Amy, if you can’t celebrate failure, celebrate pivots instead. This allows you to unlock a whole different mindset, one that says, ‘our failure has taken us to the next step,’ which is a more credible stance.

One thing you don’t want to do, warns Amy, is hide mistakes out of sight, because people’s memories fade, or new employees come in, and they commit a basic failure, which is when you have an intelligent failure the second time around. And that’s not to be celebrated.

Plus, you not only want individuals to learn from their mistakes, you want the rest of the team and the organization to learn from them too. When we collectively have a library of knowledge that we share, we’re much better equipped to get things right.

Mastering the skill of reframing

“I think reframing is a really crucial skill in this domain that we’re exploring today. It’s related to the growth mindset. In fact, people who have a strong growth mindset are masters of reframing.”

What does reframing look like outside of the workplace? It’s pausing and thinking about your future carefully. Otherwise, says Amy, you simply keep doing what you do. Take time to look up and consider what else the world needs from you, not in a grandiose sort of way, but what does your community need from you? Your family?

When you’re young, never choose a job for its pay

Young people should never choose a job for its pay, advises Amy. They should choose it for its learning potential. Your value and your ability to make a difference and to do well in your own life is 100% connected to how much you learn in your 20s and beyond. So pick opportunities for their learning potential.

“The only mistake is being so afraid of making mistakes that you don’t stretch. And then you steal from yourself that opportunity to grow and learn and do things you never thought were possible in your life.”

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  4. Why Collaboration is Key to Achieving the 17 SDGs

Why Collaboration is Key to Achieving the 17 SDGs

John W MacArthur is Senior Fellow and Director of the Centre for Sustainable Development at the Brookings Institution, and co-founder and co-chair of 17 Rooms, a partnership between the Center for Sustainable Development at Brookings and The Rockefeller Foundation.

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7 min read

Getting involved with the Sustainable Development Goals (SDGs)

While John was first involved with the United Nations helping work towards achieving the Millennium Development Goals; today he’s working not so much on the next set of goals – the Sustainable Development Goals (SDGs) – himself, but rather on catalyzing others’ action toward achieving these goals.

Because the answer doesn’t lie with the work of one person, says John, it’s going to require global collaboration to sort out the world’s problems:

“I see the Sustainable Development Goal challenge as an amalgam of those problems. There are 17 of these goals, across basic human needs, across jobs and economic opportunity and how our planet works, and how we work together.”

While there is evidence that more and more people are talking about these goals, and the need to achieve them, the challenge is that people aren’t actually taking action on them, as is needed.

The 17 Rooms initiative

John co-founded the 17 Rooms initiative as a fresh approach to catalyze next step actions for achieving the SDGs. In this program, every SDG has a seat at the table, but rather than deliver presentations about the goals, the focus is on having conversations about taking next steps towards the goals.

“When I go out into the world and talk about the Sustainable Development Goals, one [of the barriers] is that the goals are just so big. How to transform our world might be a motivating tagline, but it’s not really an actionable one. It’s just too big.”

Also, says John, the goals’ deadlines are too far off for people to feel a sense of urgency. Having just gone through the pandemic, people are currently fighting to get their lives back on track. The other issue people have, says John, is their world view extends to the edge of their village, town, or community. 17 Rooms is meant to be an antidote to these barriers.

“We’re not claiming to be the entire solution to the Sustainable Development Goals. The issues are too big for that. But we are trying to be an entry point for people to take decisive next steps on each of the goals, to bend the curves towards action.”

You literally just have to pick a lane, says John, then niche down with an issue that resonates with you, and figure out how to take a decisive next step within each goal. That’s how progress happens.

17 Rooms X

Alongside 17 Rooms, the initiative also has what they call 17 Rooms X, which is a way for communities to take their problem solving into their own hands without the discussion descending into arguments over what’s the most important issue.

The 17 SDGs, says John, are the summary of what is most important; they’re a way to get everyone on the same page, figuratively and literally. And then it’s problem solving in parallel and in concert.

“We need a bit of a symphony where we need the violins to play, we need the pianos to play, and we need someone on the drums. But it’s actually a little more jazz than symphony, of finding harmony, where each of the communities that has its own view of what’s the right sound, what’s the right melody, can problem solve on their own, but come together to do it in concert.”

The deepest change, says John, comes from people saying: ‘no, what we are going to do is X’. And the ‘we’ is more important than the ‘I’. Personal responsibility is huge, but so much of it comes down to group empowerment.

To stay relevant, businesses need to lean in

For businesses that lean in and lead the way, the value creation opportunity here is huge, says Reynir, this disruption is going to be even bigger than the .com disruption.

“If you look at the 10 largest companies before the.com, where are they now? Most of them are gone. That’s the same thing happening now. Businesses that don’t lean in and don’t jump into one of the 17 rooms and are not part of leading the way and creating that leadership. They’re going to be disrupted.”

How to get involved in 17 Rooms

There are two ways you can get involved in 17 Rooms, says John:

  1. If you want to take part in the global flagship program, the team at 17 Rooms curate the rooms. They operate an open door policy for nominations, kind of like a call for submissions – anyone who wants to bring a room idea to the table can bring it through the online portal.

  2. The second way is to organize rooms yourself through the 17 Rooms X program. The team is actively looking for strategic partners right now, that is, people in different parts of the world who might be able to help innovate and tweak the methods to make them work best for their community.

The value of bypassing legacy systems

In the West, says Reynir, one of our biggest challenges is finding a solution for global problems with legacy systems still in place. In developing countries, they have an opportunity to skip ahead because they don’t have to navigate existing systems. They can move much faster forward and create more efficient value chains that adopt new technologies without having to deconstruct legacy systems first.

For example, John reckons for a very small amount of investment, it’s totally viable that we could end extreme poverty by 2030, simply by utilizing mobile technology to quickly identify the poorest people in society, and do cash transfers at very low cost. This idea is based on the pioneering program the Minister of Digital Technologies in Togo operated during COVID, using mobile technology to hyper target people to get cash to them quickly via external partners.

“If there’s a disaster, we now have global wisdom to build the infrastructure to help people. If we can do it for a disaster, we could do it for basic social protection for minimum subsistence needs to help communities. And that is potentially a gateway to doing it for all of humanity.”

The world needs trust, hope, agency and human connection

What the world needs most right now, says John, is trust. We need to think about sources of trust, and sources of hope, because these two things go together. If you lack trust in the world around you, it diminishes hope. But in order to sustain hope you need a bit of trust.

Plus, people need agency. They need to feel that what they are doing is making a difference. And they need a sense of community, that they’re not doing it alone.

“The world is like a bicycle, where it’s much more likely to fall over if it’s standing still. We need to find ways to help people pedal their collective bicycles forward, so that they have a sense of where they can go together.”

How to design your life work

If you’re just starting out in the world of work, think about what you want to work on, says John, not where you want to work. Because where you end up doing the work you want to do might not be somewhere you’ve heard of before.

Then identify who is doing the work, and figure out how you can get involved with working alongside them. That might be a professor at your university who has a research project you can be involved with, or an organization that is doing something compelling that you can volunteer with.

“It’s really important for young people to know the reason we have these problems today is because the previous generation hasn’t figured it out. So don’t wait on them to solve this, you are actually probably even better placed to solve it than the previous generation, because you don’t think things have to work the way they work.”

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  4. Strategy for Impact in the World of Sustainable Investing with Zoe Bulger

Strategy for Impact in the World of Sustainable Investing with Zoe Bulger

With a background in the social sector focused on supporting mission-oriented founders and organizations, Zoe Bulger, Impact Manager at Summa Equity, is all about integrating impact and ESG across the investment process and across portfolio companies, as well as the reporting side of it.

  • Podcast

7 min read

In recent years, impact and ESG has been getting more and more heat with traditional actors entering into the space, and lots of regulatory movement as well. Impact investing, for example, has surpassed $1 trillion, with conservative estimates saying that over $18 trillion of assets are now under management related to ESG.

“There’s been a historic movement on the regulatory front. Across regions we’re seeing regulators begin to try and up the bar on what sustainability and ESG means in the financial markets.”

The political environment in the US has exposed how many people still aren’t clear what the different terms mean: what is impact? What is ESG? And on the framework and guidance side, there is much complexity because it’s a very fragmented space. But that doesn’t mean that opportunities don’t exist.

“There’s a huge opportunity and actually an advantage to this moment before we’ve arrived at a complete set of standards and rules…There’s an inspiration in the ambiguity.”

Greenwashing – a step in the right direction?

Many companies, says Reynir, launching impact funds and committing the main funds toward sustainability, have to start somewhere. And for some of them, they’re approaching it by greenwashing. And while greenwashing has negative connotations, it is still a step in the right direction, says Zoe – everyone has to start somewhere, after all.

And as the regulatory space becomes more defined, and impact investing becomes more mainstream, negative practices will eventually come out in the wash.

“My hope is that the investors, the more active owners in the private equity space, in particular, will demonstrate what it looks like to meet that highest standard of regulation, but I think it will take a few years before we get there. And it’s not a given.”

Take Summa Equity for example, says Zoe, they don’t struggle with ambiguity in the regulations because they’ve been clear from the start on how they operate. They’ve built a strong culture to support their work, and set up processes to ensure that it’s all embedded.

“We believe that if you ignore the challenges, and you don’t try to find a solution for it, you will miss both the value creation opportunities, and you will get some headwinds in areas where the world is changing.”

Article 9 of the Sustainable Financial Disclosure Regulation (SFDR)

Article 9 of the Sustainable Financial Disclosure Regulation (SFDR) has been getting a lot of attention in recent weeks as funds are downgraded from Article 9 to Article 8. But what does that mean for investors and businesses?

In 2021, the EU’s SFDR kicked into effect, and it created a shared framework to try and facilitate sustainable investment with more transparency and standardization across financial markets, requiring the categorization of financial products across different tiers of rigor around sustainability and impact.

The three classifications under the regulation:

  • Article 6 is the space for funds that don’t integrate sustainability into the investment process, or don’t want to be held accountable to having integrated sustainability.
  • Article 8 is for funds that take ESG under consideration, but don’t necessarily pursue impact or sustainability goals in and of themselves.
  • And then the final tier, the highest bar on impact, Article 9, is for financial products that have social and/or environmental objectives.

“We live in a world that is fraught with many wicked problems. And this is one way to try and shape the amount of financial flows to actually go towards the projects that we know have an impact.”

But the reality is, achieving this goal is a long way off right now, because of how the regulation is showing up and being put into action.

Downgrading funds

One of the things Zoe is seeing at the moment is the downgrading of many funds from Article 9 to Article 8, meaning rather than having impact objectives at their core, ESG is now more a consideration.

In November 2022 alone, the statistics were staggering, says Zoe – 10% of all Article 9 funds announced plans to downgrade. That’s a huge number of investors shying away from the opportunity to lead with an objective around environmental or social goals.

“There’s a real need for investors to stay the course on Article 9, it’s going to bolster the credibility of regulation. And it’s going to show that there is a way forward for private markets to be part of the solution to some of society’s wicked problems.”

To help lead the way, Summa Equity are building out a framework to try and advance where the ambiguity exists in the regulation so that it doesn’t stifle their work. They’ll then publish that framework and the key questions they’re asking in the investment process, externally, to help other investors who might be contemplating downgrading.

“Nothing has changed from our very beginning; we have invested against a set of global challenges. And so for us, we don’t have any intention of downgrading. Instead, we’re working hard to become even more consistent and explicit about how we make investments aligned with environmental and social objectives.”

The theory of change

At its most basic, says Zoe, the theory of change is the logic that gets you from the world we have today, to the aspirational world we want to live in. It’s where the rubber meets the road, and it’s how you explain the way you as an individual actor, or an individual investor or individual company, will contribute to the solution, and also how you will act in concert with those around you.

There’s two really powerful components to using theory of change as a way to think about your impact strategically, says Zoe.

  1. One is recognizing you are a single actor and that your actions depend on those around you. And it begins with identifying the low hanging fruit and longer term goals for how you might shift towards coalitions, or approaching the problem in concert with others.
  2. The second way is it can expose the gaps in the logic, the places where you might want to focus on an output.

The world needs empathy

What the world needs most right now though, says Zoe, is empathy and a willingness to work across unexpected boundaries.

“It’s so important to not lose sight of that empathy that allows us to look across and see a relationship that was perhaps transactional before. If each one of us can bring that mindset to how we move through the world, we will be well on our way to solving some of these wicked problems.”

Zoe’s advice to young people looking to make choices about how to design their life work? Trust your own instinct.

“If you’re feeling inclined to learn a new skill that isn’t directly relevant to your field, but you personally see a way in which it might help you tackle inequality, go learn that skill, or go take that job.”

Raise questions around ambiguity, says Zoe, and look for a clear path forward. It’s really not that hard, you just have to make choices.

“There’s a human tendency to want things to feel simple, to feel clear, to have a rulebook. But there is a very powerful path forward if we trust our instincts, and we ask the harder, rigorous questions, despite that ambiguity.”

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  4. Reframing Mindset to Help Build Better Leaders with Roberto Verganti

Reframing Mindset to Help Build Better Leaders with Roberto Verganti

Roberto Verganti is Professor of Leadership and Innovation at the Stockholm School of Economics, and Design Theory and Practice at the Harvard Business School. Roberto firmly believes that reframing is the most advanced leadership skill leaders can possess. But what is reframing?

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9 min read

Episode 10

“Reframing is one of the most advanced practices of our mind when we address a problem. In reality, we always use a frame of focus. It’s very important because it helps us to focus on what is relevant and filter out what is not relevant, which otherwise becomes too complicated to make a decision.”

Innovators are at risk of ridiculed

The problem is, says Roberto, too often innovators and pioneers are at risk of being the laughing stock in the community, because they’re ahead of the curve with their ideas. Take Summa Equity for example, says Reynir, when he first started exploring sustainable investing, people said he was mad. Now, you can’t invest, or run a business without taking sustainability into consideration.

“I’m amazed at how the world has changed since 2016, over the last few years, and how suddenly it seems like the investment community is starting to reframe. Suddenly sustainability has to be a core part of the equation, it can’t be ignored anymore, comments Reynir Indahl”

This, says Roberto, is a classic pattern of reframing. When you first reframe, and you’re the first one to do it, people believe you’re crazy, which is why reframing is so complicated. Because at the beginning, when you’re pushing against so many closed doors, you doubt yourself. And even if you reframe for yourself, the second challenge is to then get other people to see things the way you do.

Why it’s hard to reframe when you’re successful

So what makes reframing so hard? Because you’re busting myths, says Roberto. Plus, the more successful you are, the harder it is to bring about change – it’s the old adage: if it ain’t broke, don’t fix it.

Which is why, says Roberto, reframing is the quintessential task of leaders. Leaders by definition are where they are because they have been successful at what they once did. But in order to move beyond where they currently are, they need to unlearn what took them this far. What took you to the position of being a leader is not what you need to progress, if you are to be a leader in a changing world.

“The myth of our own success prevents us from [moving further] because we believe we have the answer. But the answer is always good for the past, not for the future.”

The space of resonance

As a leader, when you see something you like, that’s easy. When you see something you don’t like, that’s also easy, says Roberto. But that’s not reframing. You only start to reframe when you are in the space in between what you like and what you don’t like. This, says Roberto, is the space of resonance.

“If you work in an art gallery, there are clearly some pieces of art that you like. And there are clearly some pieces of art you don’t like. But then there is something that stopped you and you don’t know why. So you start feeling there is something that is talking to you. And you need to follow that, which is the space in between.”

People follow people, not ideas

How do you get into this in between spaces at work? There have been a lot of studies on this, says Roberto, and the resounding theory is that people don’t follow an idea, they follow a person. When you connect with someone, in the moment, you willingly enter into new spaces, when you do new things not because you’ve found a new idea, but because you’ve found a new person that leads you into places where you never normally go.

“Think about your life, how many times you’ve been doing things you could never believe you will do just because of love. Love is one of the most powerful reframers. Sometimes you reframe when you find a new person, and you don’t know why but you just follow that person, because you just want to be close to that person. And then you end up in new spaces.”

Too often, leaders are led to believe that the best leaders are the ones who know everything, but we know this is just a myth. The best leaders are the ones who say ‘I don’t know, but I’m curious to find out’.

Why connect reframing to innovation

Why is it important to reframe as leaders in business? Because, says Roberto, people fall in love not because something works better, but rather people fall in love for something that is meaningful.

At the level of leadership in business, this type of reframing is known as innovation. And, says Roberto, there are two levels of innovation:

  1. There is one where we solve a problem for the better,
  1. The second is where you stop and reflect on what you can do to make meaning for people using your product.

This second level requires reframing, or, in more familiar parlance, it’s a search for purpose.

And the companies that do this so well, says Roberto, sometimes we forget that they’re a business because what they do, the product or service they do, they bring so much meaning to people.

How can you engage your whole organization in the reframing process, the innovation process? Engagement is one of the biggest challenges, says Roberto, especially in this new world where we want innovation to come from the bottom up, not just the top down, or at least in collaboration, and achieving this is very challenging.

“Every leader in his small team and his small group needs to find the meaning of what we do. Every team eventually delivers something, even if you’re in accounting, you’re delivering a performance report, and it needs to be meaningful. It is a job at every single level. It should be a mindset that is spread all around the organization.”

Sustainability as a gift

Sustainability should be a burden on the innovator, not on the customers, nor on the profitability of the business. People shouldn’t have to make sacrifices to choose the sustainable option. The innovators need to make the mental sacrifice of being more innovative. If you approach things in this way, says Roberto, this is the real reframe. We will never succeed with sustainability by asking others to make sacrifices.

“What we are trying to do now in our studies is [understand] how we can develop a more systemic thinking approach to innovation, in which you don’t innovate only for the user, you innovate for an ecosystem of users, stakeholders, places, nature, things.”

How to design your life’s work

What is Roberto’s advice for the next generation just starting out in the world of work? Don’t look at the current job market to decide what you want to do with your life, says Roberto, the jobs’ market is changing so rapidly, it will be a very different place even in the next three years. And if you really like doing something, keep it as a hobby, especially if it’s fun, don’t compromise – you need pleasure in your life.

If you can, find work that gives you meaning as a person. That work doesn’t have to be pleasurable, because there will be a lot of pain in your profession, instead, choose what gives you passion. Passion comes from the Latin patior, which means to suffer.

“I was not ready to suffer for the guitar, because it was just a pleasure. But I’m ready to suffer for teaching because the idea of helping young people grow up gives me meaning. So that’s a little bit of a criteria to choose what to do. Find something that gives you meaning and you’re ready to suffer from that.”

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  4. Why We Need a Common Standard for Sustainable Reporting with Conor Kehoe

Why We Need a Common Standard for Sustainable Reporting with Conor Kehoe

Having spent the majority of his career at McKinsey & Co, Conor Kehoe lived the intergenerational, integrated thinking that is so desperately needed in public companies. Now, as Chair of the International Integrated Reporting Council (IIRC), Conor is championing for integrated reporting and accounting practices to become mainstream.

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Episode 9

So what advice does he have for leaders of corporations? How should they best react to pressure from Millennials and the top down pressure from investment institutions, who are demanding that corporations have a positive purpose?

“They definitely need to think about the long term prosperity of their corporations. They need to pay attention to how they attract the next generation of employees and the next generation of consumers.”

Business is not going to succeed in a society that fails, says Conor. Corporations need that context to make themselves attractive to future generations. And yet, while many corporate executives absolutely agree that longer time horizons for business decisions would improve performance, half of them say they would delay any kind of value creating projects, if it meant missing the quarterly earnings targets.

So how do you change that type of thinking?

Public company boards, says Conor, need to talk about the long term, and act in the long term, which then reduces the pressure on the company to act in the short term. Plus, by thinking long term, you end up selecting long term investors. If you behave in a short term manner, you’ll end up attracting short term investors.

Lessons learned from McKinsey & Co

McKinsey & Co helps corporations with strategy, organization, and operations, says Conor.

“On strategy, what I’ve learned over the years is the importance of collective action, while at the same time having tolerance of Mavericks.”

The second thing on strategy, says Conor, is the importance of good decision making. And good decision making comes from having good processes in place.

On organization, purpose and culture are key, Conor says, and shareholder value is the happy outcome of good purpose, culture and strategy. Finally, on operations, bottom up ideas have been hugely beneficial in improving processes.

“These are the main lessons: have a collective action, tolerate Mavericks, make decisions through process, even if it feels less satisfying, be very clear on purpose and culture, and combine bottom up ideas [and] a lot of trial and error as you develop new products.”

Impact investing and sustainability reporting

More recently, Conor has been involved in trying to rationalize the very confusing sector of voluntary sustainability reporting.

Having merged the International Integrated Reporting Council (IIRC) with the Sustainability Accounting Standards Board (SASB), and then merged both of them into the International Financial Reporting System (IFRS) to become their sustainability reporting arm, called the International Sustainability Standards Boards (ISSB). Conor’s next task is to try and rationalize the impact accounting world.

“This is important because the world of sustainability is a world of KPIs. And if you talk to LPs [very big investors], they say things to you like I’m in the middle right now of trying to report to my beneficiaries on sustainability. How do I add a percentage point of diversity with a tonne of carbon?”

And the truth is, says Conor, you can’t add it up, nor can you compare it in monetary terms either. At present, you can’t easily put a price on the benefit of the sustainability work your organization is doing.

Which is why you need impact reporting.

Impact reporting

Impact reporting, says Conor, allows you to translate KPIs into dollars (or euros). So you have a common metric that allows you to add things up, and allows you to compare the cost of achieving them with the value of the outputs in a common currency.

“It’s only when you get into impact accounting or impact investing, that you start to think about this other dimension, which is not just how sustainably am I producing the product, but how sustainable is this product for the population and the planet that it’s being delivered?”

Because the fact is you can have a ‘sustainable oil company’ e.g. one that produces oil while burning less oil to produce oil. And this clearly highlights the problem with our current focus on sustainability reporting – because it doesn’t solve the bigger problem which is the impact that oil has once it’s out there in the marketplace.

“The big challenge is that most of these standards require something new from corporations; they require them to reach back into their supply chain and get metrics out of their supply chain.”

Creating a global set of standards

The investor community and the corporate community are pretty clear on what they want, says Conor, and that is, they would love one global set of standards that are mandatory and assured.

“When we were going through the process of merging IIRC, and SASB, we would put out feelers to New Delhi, Beijing, Tokyo, just to make sure that we weren’t heading off in some strange direction. And the message was pretty consistent: if you Westerners can sort this out, within reason, we will follow.”

Adopting a sustainable agenda

At McKinsey & Co, an organization with 33,000 employees advising many of the worlds’ most influential businesses and institutions, they have intergenerational, integrated thinking at their core. And if they can do it, so can anyone. But how?

“Most large corporations need to be shown how sustainability aligns with long term economic value for it to really take off, because they don’t see themselves as moral and social leaders. They see themselves as good corporations, as people who need to align with the social norms and the laws that prevail, rather than lead them.”

Most organizations feel a strong responsibility, says Conor, to use shareholder’s money wisely. Which means, if they’re investing millions of dollars into a project to increase diversity or reduce greenhouse gases in their production process, They need to be able to explain the benefits of those efforts to the shareholders, or at the very least the benefits to society of doing that.

Which is where impact accounting comes in, says Conor, because this is one way to showcase the value to society, and to the company, of a particular investment along a dimension of sustainability.

And the key to change, says Conor, is to change mindsets. Because you change behavior by changing mindsets. And you change mindsets by showing people data they haven’t seen before.

“You will see, over time, more firms emerging [applying impact accounting], but they need to build up a track record to be convincing to these large LPs. A large amount of money will move gradually towards this new space, if the LPs are increasingly convinced it’s attractive.”

What the world needs most right now

The effects of the Industrial Revolution, says Conor, look to have finally caught up with us. Our climate system, like any system, has limits, and we appear to have reached those limits.

“[My] worries are worries about climate change, but also worries about large disaffected parts of the population that aren’t on board, even perhaps with believing in [climate change], nevermind doing something about it.”

Young people need to get more politically involved, advises Conor. Too many of the next generations rely on corporations to agitate for change or to react to change, but ultimately, changing laws and societal norms lies in the realm of elected politicians.

If the talk resonates with you, we’d recommend you listen to this episode too.

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  4. Why Unity and Collaboration are Key to Saving the World with Gro Harlem Brundtland

Why Unity and Collaboration are Key to Saving the World with Gro Harlem Brundtland

Dr. Gro Harlem Brundtland is a physician, politician, and the former Prime Minister of Norway, as well as former Director General of the World Health Organization. In 1983, the World Commission on Environment and Development, known as the Brundtland Commission, was established and chaired by Gro. Then, in 1987, they published a report called The Brundtland Report.

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6 min read

Episode 8

This report was a true milestone, because for the first time, the principle of sustainable development was articulated at a global level. The report then led to the first Earth Summit.

Initially reluctant to take on the role, Gro understood what an important moment in history this was, despite being criticized by the opposition party in Norway for participating (Gro was still Prime Minister at the time).

“I knew that if I was going to deal with the challenges globally that are affecting the earth, I couldn’t deal with it without putting it into a broader development economic policy context, which is why I named the commission, Environment and Development.”

The issues preventing full consensus

“I was convinced if this report is going to have an effect, it has to be a consensus report, I have to have all my 22 commissioners agreeing on the text and on our recommendations.”

While there were multiple issues that made achieving consensus difficult, the two main sticking points, says Gro, were religion and nuclear energy.

Everybody on this planet should have the right to decide on reproduction and the right to access family planning care. The last thing the world needs is to be overwhelmed by a number of new people that other people didn’t want, says Gro. But for the representatives of certain religions, Catholicism and Islam in particular, they understood that what was required was necessary and important for earth and the future of humanity, but they couldn’t put their name to a report that went against their religion.

“In the end I had to take them one by one and ask them to feel the responsibility for their children’s future, instead of thinking about the fact that they would have criticism from their own religion. That was maybe the most difficult part of getting a consensus.”

The topic of nuclear energy was another hard one to get consensus on because the commission simply couldn’t conclude that nuclear energy was safe. If it was safe, it would have been a key factor in the solution for a world that needs energy transition and getting away from fossil fuels emissions.

“We found a phrase that was acceptable [for members]. It was that nuclear energy will only be acceptable if the present problems with the storage of the nuclear material are solved.”

The social aspect of sustainability

In the 1987 report, Gro expressed concern that there was too much focus on environmental issues and not enough on the social aspects of sustainability.

You need to have a holistic approach, says Gro, there needs to be a solution that moves poor people out of poverty and onto a sustainable path. If you discount the social aspect, you’re never going to find a solution to climate change, because too many people can’t afford an alternative to fossil fuels.

“The discussion going on after Paris and with COP 27 coming up, is still the discussion about who is willing and ready to pay more, and to secure more financial funding for the investments that are needed to choose a renewable energy choice or renewable pattern of development.”

While it would be cheaper in the short term to use coal as the source of energy, says Gro, somebody has to cover the cost for developing countries to switch away from fossil fuels.

Why the speed of change is slow

Back in 1987, the commission created the goal that by 2000, we would have achieved sustainable development. This hasn’t happened, says Gro, for the simple fact of what that would take to fundamentally change our economic systems across the world. 192 countries need to agree on what that means in terms of commitments and agreements of an international nature.

Early on, says Gro, the business roundtable for sustainable development understood the seriousness of the crisis and wanted to be a part of the solution. While many were simply greenwashing and trying to avoid change, we’ve moved on a lot since those days.

“Now there is more openness, more reporting required from companies, there are more civil society organizations that are looking into the reality of firms. They cannot as easily as they could 15 years ago hide what they are doing from public opinion and public knowledge.”

The lack of mandate at the World Bank and IMF

During the pandemic, it became apparent that the World Bank and IMF did not have a mandate to push sufficient money quickly into the world. And, says Gro, we’re in the same situation now, ahead of COP 27.

“There has to be change in the way the World Bank and the IMF work. They have to be able to change their systems, reforming them, so that necessary collaboration can mobilize the necessary concessionary funding to help the private sector innovate and invest in sustainable energy sources.”

The multilateral system has not developed the way it needs to, to support collaboration across countries, says Gro. Not in the area of sustainable development and climate, nor in the area of pandemics, nor with the nuclear threat. The multilateral system that is in place is outdated, compared to what the world in 2022 needs.

What the world needs now is unity

What the world needs most right now is unity and collaboration, says Gro.

“I believe that some good things will happen in Sharm el Sheikh because enough leaders are aware of the danger and the drama ahead of us, they realize we cannot drop this, even if there is a war in Ukraine. And there are a lot of problems socially, price inflation, you cannot look aside from the long term dangerous trend of climate change.”

As individual nations, we aren’t equipped to overcome these issues, but in collaboration, we stand a chance. But right now, too many young people, says Gro are focusing on themselves, on building a career, they’re worrying about what is best for them. They aren’t looking at the bigger picture, they aren’t thinking about a long term future.

“Engage yourself in ideas and principles that you believe in, whatever they are, and then try to work with others to make change in the direction of what you want, then you will find your way, and you will see where your knowledge and your energy and your enthusiasm can lead you and how you can contribute to a better future.”

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  4. Why Impact Investing is a Sustainable Solution to Global Challenges with H.S.H. Prince Max von und zu Liechtenstein

Why Impact Investing is a Sustainable Solution to Global Challenges with H.S.H. Prince Max von und zu Liechtenstein

H.S.H. Prince Max von und zu Liechtenstein is chairman of the wealth and asset manager, LGT group, managing over $300 billion US dollars worth of client assets from offices in 20 of the world’s key financial centers.

But what motivates Prince Max, a member of the Liechtenstein Princely Family, a family that has been entrepreneurial for centuries and today runs a company portfolio ranging from agriculture and forestry to the production of alternative energies and the financial industry?

Let’s find out.

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7 min read

Episode 7

There are three things Prince Max is passionate about:

  1. Being out in nature, something he’s done since he was a small boy, and where some of his strongest and nicest memories were created.
  2. People, he’s always been a people person, especially his immediate family, but more generally he enjoys interacting with people.
  3. And last but not least, he’s incredibly passionate about the work he does day to day. The things he works on at LGT and Lightrock drive him, because he believes that this work is what is needed in this world.

The values of a Princely Family

What are the values of the Princely Family that drove Max so early on in his career to pursue impact investing and sustainability?

“There is actually a very strong and long legacy of the family engaging in business, also in politics, and also in philanthropy, over a very long period of time.”

Having grown up with a legacy of philanthropy, Prince Max’s parents passed on to him a desire and aspiration to become a positive contributor to society. Theirs, Prince Max acknowledges, is a privileged position, one where they have a responsibility to do good things and be a good force for the world.

The family as a whole have adopted a long-term view of stewardship, placing the family fortune in a foundation, and are keen to leave the world a better place than they found it.

Integrating sustainability into LGT

The family business, LGT, has committed to net zero across all operations and investment portfolios by 2030, as well as committing to making everything the company does sustainable too. But how have they integrated sustainability into every product across the bank?

“This systemic integration of impact is ultimately an ongoing effort and a journey where we all continue to learn and get better and better and better.”

But, says Max, the tone from the top of the organization is essential to the integration of sustainability. It requires ongoing work and special efforts to make sure this commitment stays fresh. Initially, he treated the sustainability pledge with kid gloves, integrating it slowly and carefully into the brand, until he felt they were consistent in their approach.

“I felt if I’m too aggressive, I might be accused of greenwashing. So it has been a journey. I’m quite happy about where we are at this point and hopefully the journey will continue to progress well.”

Transforming philanthropy through a venture capital model

Prince Max launched LGT venture philanthropy in 2007 and is counted among the pioneers in impact investing.

“When I joined LGT, it had a private banking business side of it, and an institutional asset management business side of it. It was very clear to me that there are actually a lot of wealthy people out there who are willing to allocate capital in a way that contributes to making the world a better place.”

Having seen how his own family had engaged in philanthropic efforts, Prince Max felt that they could do more, and that LGT as it currently was, didn’t have suitable offerings in that area. He knew they needed to create something better, and so he did.

“As always, when you start these journeys, you have a sense of direction, but you don’t quite know where you will end up. It was incredibly rewarding and interesting and has helped to progress LGT in many ways on its broader journey to sustainability.”

The evolution that they’ve been through, says Prince Max, is one which applies to the broader impact investing space. As they’ve gone on, people have realized that impact investing is something where you can actually combine even better financial returns (than traditional investing) with a very positive impact.

This evolution has helped them attract top quality, private equity talent who saw what LGT were doing, recognizing that this was another way of doing private equity. Albeit one that is highly rewarding, both from an impact generation perspective, but also in the way you can interact with the portfolio companies.

Lightrock – sustainable capitalism

Early on Prince Max realized it was better to separate the purely philanthropic activities going into not-for-profit organizations, from the capital allocations to for-profit organizations.

And so he decided to bring all of their impact investment activities under the roof of a new company, Lightrock. Lightrock is a global private equity platform that seeks to achieve financial as well as societal and environmental returns by investing in businesses that contribute positively to humankind and the planet.

Today, Lightrock manages several billion euros in impact investments and is among one of the largest impact investors worldwide. The organization aims to leverage its pioneering position and experience to scale and mainstream impact investing across asset classes over the next decade.

Prince Max gives an example of one of their early investments in Latin America, a company called Dr.Consulta, a healthcare business in Brazil. Since LGT’s investment in 2014, this company has built up a chain of healthcare clinics that cater to people who can’t afford private healthcare. LGT has invested in several rounds and now Dr.Consulta is a substantial business with over $100 million in revenues. Profitability continues to grow rapidly, as they serve a client base that had not had access to healthcare before.

The world needs a win win mindset

The world, says Prince Max, is in a very tough place at the moment with enormous environmental, social and economic challenges that need addressing.

But what the world needs most is a change in our value systems. He feels they’ve shifted over the last 30 to 40 years, becoming too egoistic, narcissistic, and materialistic at every level – governmental, business, and also the individual level.

“We need to, at all these levels, understand that we are part of a big ecosystem that is incredibly connected. And we need to shift our value systems and understanding and become much more holistic in the way we look at things – more long term oriented, more comprehensive.”

As a collective, we need to engage much more on those activities that have a positive impact on the broader ecosystem, says Prince Max, and to discontinue those that might bring a win for ourselves, or for organizations, but actually, from a broader ecosystem perspective, are detrimental.

“Kennedy famously asked the question: ‘Don’t ask what the state can do for you, but ask yourself what you can do for the state’. We need to applaud more to this type of engagements that bring comprehensive progress. If you applaud more, people will move their hearts because everyone likes appreciation.”

If each one of us in everything we do, says Reynir, always thinks about creating win-win e.g. if I do this, the planet shouldn’t lose. If I do this, society shouldn’t lose. If I do this in one of our companies, the customers shouldn’t lose, the suppliers shouldn’t lose. If the philosophy of creating win-win is in everything you do, all the problems we have will be solved.

What can you do today?

“What is key is that people engage for the good, but take responsibility in how they engage. It is important that the ‘how’ is linked to their own passions, and what gives them motivation, because we need strength and motivated people.”

If we all do something using our own particular skill set, says Reynir, directing our efforts to progress our broader ecosystem, we can bring about change. As Reynir says, everyone should follow their passion, but change is a million new beginnings. So in every small thing you do, think win-win.

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  4. Why Businesses Need to be Challenged on Their Social & Environmental Efforts with Tariq Fancy

Why Businesses Need to be Challenged on Their Social & Environmental Efforts with Tariq Fancy

Tariq Fancy, founder of Rumie Initiative, an education tech company using innovative mobile based micro learning to bring free digital learning and to close learning gaps, last year wrote a manifesto outlining how he had gone from evangelizing sustainable investing for the world’s largest investment firm BlackRock, to criticizing sustainable investing as a dangerous placebo that harms the public interest.

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8 min read

Episode 6

“These are the kinds of difficult conversations that we need to have quickly, because we’re running at a time when the business community has an important role to play in solving social and environmental challenges.”

In doing this, he challenged business leaders to prove him wrong. So why did he do this? Why did he feel he had to poke the hornet’s nest, so to speak, and what reactions did he get from the investment community?

“While I was [at Black Rock], I had reached the conclusion reasonably quickly that most [sustainable investing] was marketing and PR of what was going on in this space, not everything, but the majority was.”

It became very apparent to Tariq that much of what Black Rock and other large investment firms were doing with their sustainable investing efforts was having very little real world impact. But no one was looking into why that was, because, says Tariq, firms like these aren’t on the hook to provide that sort of information.

Comparing climate change to cancer

Tariq recalls telling a friend that he likened investment firms’ ESG activities to giving wheatgrass juice to a cancer patient.

“Let’s say climate change is slowly spreading in the body of the planet or its people. And wheatgrass juice is a nice, green and well marketed health product, but there’s no reason to believe it’ll stop cancer and I thought, well, this is not harmful, but it’s not helping.”

Even worse, concludes Tariq, it’s like giving wheatgrass juice to a cancer patient and they become so enthralled by the marketing promise of the juice that they delay chemotherapy in favor of it.

And that’s what Tariq believes is happening in businesses right now. They’re wasting time greenwashing activities that sound nice, but don’t actually bring about any tangible change.

The need for government regulation

But, says Tariq, the more worrying thing he discovered was that people who saw the headlines around ESG and social purpose said that we don’t need government regulation.

“It’s a bit like advertising aggressively around good sportsmanship being the answer to cleaning up a dirty sport, not referees, even though the sport hasn’t changed in 20 years.”

But in reality, says Tariq, we need systemic regulations across the board. And these need to be mandatory, not voluntary. Because what is actually happening through sustainable investing is actually hurting the environment more than helping it.

The final trigger for Tariq to go public about this greenwashing, was watching the reaction of business leaders to COVID.

Previously business leaders had said you don’t need to regulate businesses because they’ll magically do what’s right, by themselves, because it’s in their best interest too. But when COVID hit – another systemic crisis – the business leaders who had previously all believed in the free market theories to flatten curves around emissions and prevent climate change, all of a sudden changed their tune and started demanding government regulations and intervention to flatten the COVID curve.

“I noticed that the same leaders who, for a long term crisis that was not aligned with their short term incentives, were quite happy to kick the can down the road, even against the advice of an expert, Nobel Prize winning economist. But for COVID, they were saying, ‘we need to do something’.”

Sparking the debate and rocking the boat

Another of Tariq’s justifications for going public was that he believed the messaging coming out of the large firms, out of the industry as a whole, was disadvantageous to their younger employees.

“If you think about it, if you have a short term economic system that is exploiting the environment and finite natural resources for short term gain, you’re creating a long term problem.”

This debate, says Tariq, needs to happen in the business community, because politicians can’t be relied upon to make the necessary changes, especially not when it’s campaign season and politicians are motivated by campaign finance.

Writing the essay and the response to it

Having worked previously in hedge funds and private equity, Tariq understood how messages spread on Wall Street: you could write the best research paper in the world, but very few people are likely to read it, even if you bullet point the summary takeaways at the top of the report.

But if you write a human interest story that has gossip and intrigue, you’ll get more people to read it. And so Tariq decided to write his essay as a story, giving it a chance of going viral. And that’s just what happened.

It started spreading widely, to a very mixed response. But what surprised him the most was that the people he thought would respond, didn’t

“The goal was to get accountability and spark a debate with Jamie Dimon and Larry Fink. But it’s just not in their interest to have a debate. That part was a bit disappointing, because it’s hard to change the narrative if you can’t surface and hold to account the dominant one that’s backed by billions of dollars of marketing.”

The ones who embraced the debate early are probably not the ones doing the greenwashing, says Tariq. But there is a debate emerging, and the most interesting thing is that the players who are doing the right things have the ingredients necessary to make change.

The challenge remains, though, that at the large firms, people there can’t actually say they agree with what’s being said publicly, because it runs against the interests of the firm overall.

The difference between ESG and an impact

Impact, says Reynir Indahl, is about creating outcomes, whereas ESG does not focus on outcomes. ESG is a better way to understand risks and other things like driving outcomes.

“The reason the world is talking about ESG so much is because the public wants to see more done in environmental and social issues, in particular climate change and inequality. And so I think that’s the big reason that it’s grown.”

Relationship between purpose and profit

Purpose in an organization is important, says Tariq, but to change the economy in a meaningful way won’t happen overnight by simply changing your purpose.

Which is where the issue lies, because for smaller organizations who can react quickly and bring about change, they can do something, whereas for the KPMGs of the world, they can’t change their stripes overnight, and expecting them to do so is the reason why much of their ESG efforts are largely marketing.

“I’m not sure that Greta Thunberg is an expert on capitalism for financial markets. But she’s very right to say that I don’t know exactly what’s going on. But I see leaders saying one thing, and then another thing actually happening, and you get a lot of people really jaded.”

Changing the narrative

One of the biggest things that Tariq is optimistic about is the changing of the narrative not on a product, or country, or system, but a changing of the broader narrative on how capitalism should be organized.

“For many years, we think we’re seeing capitalism, but I would argue we’re seeing neoliberalism, which is a version of capitalism that has an extreme faith in the markets to solve all problems. And this is the important part – even without the government guiding it.”

COVID has helped drive the idea that governments need to lead on climate change. By holding companies accountable for playing their part, we might see success with climate change.

“The more you have people realizing that systemic crises require systemic solutions, flattening the curve requires inconvenient changes today, to avoid the curve getting out of control.”

So what does the world need most right now?

An honest debate about what’s going to be required to address the environmental and social challenges we face. This debate will be difficult because we need to be honest about the areas which require sacrifice, where what is required could go against our own short term interests, but it’s the right thing to do.

But, says Tariq, his gut tells him that hasn’t happened yet.

“We’re not having that debate [now] because a lot of what’s happening is preserving the status quo. And I think that the fact that that debate is starting is great. But I think we need to push faster, because it’s a clutter of misinformation that’s going to slow our response.”

The most important takeaway, says Tariq, is that people feel emboldened to speak up and take part in the debate. Especially younger employees, who may not have the courage to put pressure on their CEOs and senior management, who can be less incentivized to make substantive changes, because their incentives are usually short term.

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  4. Bringing Heart, Healing, Soul & Courage to Business with Raj Sisodia

Bringing Heart, Healing, Soul & Courage to Business with Raj Sisodia

Raj Sisodia is Distinguished University Professor of Conscious Enterprise, Tecnológico de Monterrey; co-founder of the Conscious Capitalism movement and co-author of The Healing Organisation. But what is conscious capitalism and how can it help us evolve to where we need to go?

  • Podcast

10 min read

Episode 5

What is conscious capitalism?

Conscious capitalism, says Raj, is a philosophy of business, a different way of life. It’s an evolutionary imperative because we have been thinking about business and capitalism for a certain way for too long.

We’ve been looking at it through a narrow scope, with the purpose of business being the impact we seek to make in the world – it’s been all about products, services and employment, with a purely financial gaze.

And it’s time to change the narrative.

Conscious capitalism began as a movement in 2008, with four pillars defining the why, what, who, and how of business.

Traditionally, says Raj, the why has always been about profits, and shareholder value. But in conscious capitalism, there needs to be a higher purpose beyond profits.

“Profits are essential and necessary, but that’s not the reason for a company to exist. Companies trying to do something impactful and meaningful and solve some challenges that we face, there’s a higher purpose.”

Conscious capitalism is also about stakeholder integration, not just about shareholder value creation. It needs to simultaneously create value for employees, for their families, for customers, communities, suppliers, the environment, society as a whole, says Raj.

And in order to achieve purposeful value creation for all stakeholders, you need conscious leadership.

“You need leaders who are focused on people and the purpose, not just the money and self realisation. It’s self transcendence in a way, impacting other people through your leadership, taking people to a better place.”

Finally, conscious capitalism encourages a trusting and caring culture, where people feel valued and inspired.

“Those are the four pillars of conscious capitalism, and when they work together in a synergistic way, because you can adopt any one of those and make a difference. But if you adopt all of them, then they all reinforce each other.”

Increased employee engagement

Companies that adopt the conscious capitalism philosophy, says Raj, create more financial wealth and outperform those that put maximising profits at the expense of everything else

Raj’s research found a number of reasons to correlate the results. For example, when you prioritise employees and their wellbeing, employee engagement goes up.

According to research by Gallup, average global employee engagement is below 20%, with engagement in the US being one of the highest at 35%. Which, if you think about it, means two thirds of the workforce aren’t passionate about what they do.

However, in companies that adhere to conscious capitalism, the level of employee engagement is well above 90%.

“People are not just engaged, they’re passionate, they’re committed, they’re a lot more creative, innovative and collaborative. And that just makes all the difference, because ultimately, every business runs on human energy. It’s the creative and caring aspects of human energy.”

Less marketing spend

The second reason why these companies are more successful, says Raj, is they spend less on marketing. They delight customers naturally, they generate business through word of mouth, and all the stakeholders involved in the organisation become marketers.

“When you have a company like this, which is rooted in a higher purpose and has these core values that are shared across all stakeholders, everybody contributes to the flourishing of these companies. So marketing spending in many of these companies is 90%, sometimes even 95%, below the industry average.”

Reduced employee turnover

Because the business is a better place to work, people want to stay, lowering employee turnover rates. When you’re not constantly having to recruit new employees you save money, and the people who stick around become more effective, more productive, more collaborative etc.

“As a comparison, Costco and Walmart are competitors. But Walmart’s annual employee turnover when we looked at it was 70%. Costco was 7%. Walmart had to replace 2 million people every year just to replace those who left voluntarily. At Costco people join, and they never leave.”

The difference between traditional companies and conscious capitalism companies, says Raj, is the latter spends money where it will make a difference.

If you pay your people well, provide them good working conditions, and good benefits. If you do the same thing with your suppliers, and you invest in the customer experience, you’re going to save money on ads and marketing generally, and you’re going to reduce employee turnover, employee recruitment and training.

Building a better world that works for all

So what’s driving Raj to pursue his aim of building a better world through conscious capitalism?

“My purpose over time has evolved, but today I would express it as bringing heart, healing, soul and courage to business and leadership, so that we can build a better world that works for all.”

Too often business is mostly about the head and the wallet, says Raj. We leave the human side, the emotions, out of how we think about economics and business. Instead we focus on dispassionate thinking and making decisions to maximise what’s in your wallet.

But when you leave out the human side of business, you aren’t able to tap into the real source of power, which is us.

The difficulty of shifting mindsets

While it’s easy to see the benefits of adopting the model of conscious capitalism, it’s difficult to bring about a paradigm shift in people’s mindset, says Raj, simply because when you’ve been educated in business school, and you see how most businesses operate, you automatically conclude that that is how things are done.

“Unlearning what we’ve already learned is one of the big challenges. There’s a deeply ingrained mindset, we’ve got theories and frameworks that all of us have imbibed. The whole paradigm of economics is based upon this idea of homo-economics as this is how human beings behave.”

But the truth is the current system isn’t what motivates us as a whole; it’s a very narrow understanding of human behaviour and doesn’t reflect what human beings really are. It becomes a self fulfilling prophecy: we treat people as though they’re individualistic, selfish, and materialistic, and so people begin behaving that way, and we start celebrating greed.

And to make things worse, says Raj, we have an economic system where we’ve selected leaders based upon certain criteria i.e. their ability to deliver numbers, rather than how they got the results.

“Very often, it’s a result of people who are quite ruthless, and even sociopathic. Disturbing research shows the level of sociopathic behaviour is about 1% in the general population, but it’s about 20% in high security prisons, and it’s also 20% in leadership and executive roles.”

Examples of companies performing conscious capitalism

Unilever, says Raj, ever since Paul Polman became CEO, are doing amazing things, not only in terms of the sustainability side, but also in terms of the future of work. They’re giving all of their 160,000 employees the opportunity to discover their own purpose, and to live that purpose through their work.

They’ve also committed to providing a living wage, not only for their employees, but also all their suppliers will have to provide a living wage in over 180 countries by 2030.

Patagonia, a smaller company, is another great example. Microsoft has done amazing things. Frisco in Costa Rica. The Tatas in India.

Being the wise fool of tough love

In the past, our vision of a leader was General Patton, says Raj, someone who is decisive, gives focused orders, and is ruthless, etc. But today, the best leaders are the ones who bring the whole human to the role. In fact they go beyond the masculine and feminine: the best leader is a wise fool of tough love.

“If you are a leader, and you’re using other people to achieve your personal goals, that’s not a leader, that’s a tyrant. A true leader is there to take people to a better place. So how do we awaken in people the desire to serve?”

Servant leadership is a related concept to conscious leadership, says Raj, and it’s essential, because it all begins and ends with leadership. If you have leaders who are just about money, power and ego, they’re going to create that environment.

But if you select leaders for their emotional intelligence, maturity, spiritual intelligence, and their value system, you’re going to find ones who will transform the company and society for the better.

How can you switch your leadership to the new paradigm? How can you achieve this awakening? There are two essential elements, says Raj.

The first is to get yourself a mentor, guide or teacher, i.e. someone who inspires you in a certain way. The second is to have a dis-equilibriating experience that takes you out of your comfort zone.

Business as a place of healing

Most companies are not healing organisations, says Raj, they are in some way hurting organisations, because the level of stress that they create internally is extraordinary.

It’s not a given that work has to be incredibly stressful, to cause heart attacks, to shorten your life. In fact, it can be quite the opposite. Work can fill your life with joy, fulfilment and meaning. It can leave you physically, mentally, emotionally, spiritually and socially stronger than when you came in.

“Businesses can become a place of healing for those who work there. They can become a source of healing for those we serve: our customers, our communities, and they can become a force for healing and society.”

So, how do we come together despite our differences, and do great things? You can not have a healing organisation without a healing leader, says Raj. And you can’t be a healing leader until you work on your own healing. As Carl Jung said, ‘until you make the unconscious conscious, it will drive your life and you will call it fate.’

“A big element of this is for each leader, each of us to work on our own healing, and understand what needs to be healed in our psyches, so that we can be a healing influence on others.”

What the world needs most

The world needs awakened, cooperative, caring leadership, says Raj. For anyone currently thinking about choosing their life work, his advice is thus:

“Stay true to yourself. Understand who you are. Know yourself, love yourself, be yourself, figure that out, and then align that with your work. You will not discover your dream work right away. But as long as you stay connected to who you are, you’re going to gradually move towards your true calling in this life.”

We each of us have a unique role to play in our evolution. But too often, people fight about what that evolution wants, rather than trying to align with it. We need to be instruments of that which seeks to emerge in the next stage of our existence here, says Raj. As opposed to trying to go against it and move things back backwards.

So what can you do right now to contribute toward a better world?

Work on yourself, on your self awareness, your consciousness. Because this impacts all the people whose lives you touch. Align the different aspects of your life, i.e. your home life, work life etc. And then find your tribe.

Make the effort to shift your mindset, says Reynir, and we will have a much better society.

If the talk resonates with you, we’d recommend you listen to this episode in your favorite podcast player!

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Read more

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