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The Investment Logic for Sustainability

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Sustainability is a broad discipline, giving you insights into most aspects of the human world from business to technology to environment and the social sciences. Sustainability is the study of how natural systems function, remain diverse and produce everything it needs for the ecology to remain in balance

It also acknowledges that human civilization takes resources to sustain our modern way of life.

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On the first day of the class a range of activities and resources on Business, Society and Planet have been provided. I was excited and nervous at the same time as I was new to this place and learning methodology. Thorley, I was aware about course description by Rhonda Bell. We discussed about sustainable development concepts, goals and watching different videos

By looking these words of Ban Ki-moon, I was a bit clear about the concepts of sustainable development. We need to invent a new model – a model that offers growth and social inclusion – a model that is more respectful of the planet’s finite resources. That is why I have made sustainable development my number one priority.”” (Ban Ki-moon United Nations Secretary-General Rio+20 Newsletter: Making it Happen. Watching the video the story of stuff by Annie Leonard we get very different and diverse views. In this video she introduced a new school of thinking, when people along the system get united we can reclaim and transform the system into new, a system which doesn’t waste resources or people. After watching the video, the issues Annie expressed were relevant and meaningful. On contrast to my thinking after watching The story of solutions was very effectively presented.

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He explained how the population is growing exponentially and already consuming more resources than it is replenishing and that if this trend continues, the future is likely to be dull. The issue on how Pentair sold their core power tools business to venture into the water business also got my attention because he clearly showed how demand for clean water is likely to grow rapidly from the over four billion middle class people across the world. This information impacts my thinking in many ways. First, he demonstrated that the stock performance of companies that had embraced environmental and social governance was just as good as and at times better than that of those that did not. From a financial perspective, there exist a positive correlation between stock performance and earnings and hence this may be interpreted that the companies performed similarly to or better than those that ignored environmental and social governance (Chris McKnett, 2014). There is much logic in the talk because companies should not only aim at increasing their earnings and market share but also aim at having quality earnings. Quality earnings are only achieved if they are easily replicable and if they are sustainable to a reasonable period into the future

In order to create value in a company, the three forms of capital are required i.e financial capital, physical capital and lastly human capital. A combination of these three types of capital yields outstanding results over the long term only if environmental and social governance is implemented. Technology can be used to solve the problem of sustainability of production by firms. With the advancement in science and technology, matters of sustainability are slowly being solved for instance in agriculture, science has enabled the yield of better crops that mature faster and hence food sustainability in future may heavily rely on science advancement. Scientists hold the key to sustainability in most processes that involve the use of biological resources. Some materials used in production can now be synthesized in laboratories in case their natural forms are exhausted which means that sustainability can be achieved albeit at a costly price in terms of financial, physical and human capital.

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In essence, institutional investors hold 8 times more money than the US GDP, so have plenty available. If we could channel that towards companies that improve social and environmental causes it could have a huge impact towards solving problems such as hunger, or access to clean water

John F Kennedy stated “There are risks and costs to a program of action, but they are far less than the long-range risks and costs of comfortable inaction”. It makes sense to invest sustainably so that we can retire wealthy, but also into a better world.

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Chris McKnett: The investment logic for sustainability Web. 24th Feb 2014

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