Reynir in Financial Times: Commercial success is key to ethical investing too
In a Letter to the Editor of The Financial Times, Reynir Indahl responded to Robert Armstrong’s criticism of ESG investing. Reynir argues that Armstrong underestimates the risks of failing to consider externalities and social impact in business strategy, as well as the opportunities for those who put ESG at the core of their approach.
Reynir (founder and managing partner of Summa Equity) writes that the problem is that ESG is still seen by too many organizations as being independent to commercial success, rather than an integral part of how they drive value and create competitive advantage:
There are numerous ways to create social and environmental benefit, but not all are materially relevant to every business. By focusing on strategies that span social and commercial, organisations will not only have the greatest impact on society and the environment, but also identify the biggest opportunities for innovation and growth.
Reynir considers Covid-19 as the perfect example of how externalities can cripple whole sectors in the blink of an eye. While the pandemic was unforeseeable, there are numerous more obvious threats, such as climate change, overburdened natural resources and rising inequality, which threaten economies and growth around the world. In Indahls opinion, the risk and cost of running, or investing, in so-called “wicked companies” is increasing all the time, through regulation, employee pressure, and customer demand.
Conversely, it is in finding solutions to these externalities, where the biggest opportunities lie.
Background: Robert Armstrong’s The fallacy of ESG investing, 23 October 2020.