First published 01 April 2014, by Alliance magazine.
In trying to get the business community to participate in an economy which takes into account people and the environment, not just profit, Robert Rubinstein, founder of TBLI (Triple Bottom Line Investing), doesn’t put his faith in the sector’s idealism but in investors’ greed and the ability to inflict ‘excruciating pain’ on business. He explains to Caroline Hartnell how and why this works. He is optimistic about more money flowing into impact investing, as defined by TBLI, but not that hopeful that it will be in time for climate change mitigation. ‘Get your wellies out,’ he advises.
You founded TBLI in 1998. What did you hope to achieve?
I wanted to create an economy based on well-being by engaging with the business sector. I realized that to do that, the business sector has to buy into it, and they will only buy into it if they feel excruciating pain. I concluded they had three pain buttons: finance, personnel and reputation.
First, I looked at personnel. I tried teaching MBA students about sustainable finance, but most of the students were only worried about defaulting on their student loans. They didn’t follow their hearts and went to work for companies that didn’t share their values.
So then I looked at finance. I decided to focus on the financial sector. I worked out that the top hundred or so owners or managers in 1998 had direct or indirect control of 30-40 per cent of the money. So I hit on the idea of trying to convince those hundred CIOs [chief investment officers] through a conference. It sounds rather naive but it does work: if you show the financial sector over and over again the self-interest, opportunity and money flows in sustainable business, it’s not hard to change behaviour.
The hard part is access. I call it the Shawshank Redemption approach – that’s the prison movie where, after 15 years of chipping away at a wall, the guy broke through but no one knew about it. That’s what this work is, it’s chipping away over and over again, there’s no big ribbon-cutting ceremony. We’ve seen massive money flows and very large deals done at the TBLI Conference, so I know we’ve had an influence on the behaviour of the financial sector, and now I would like to scale up dramatically.
So what is the pain that you’re making them feel?
If people don’t want to invest in you or work for you because of your lack of interest in sustainability, which is what happened to Shell in Nigeria and over Brent Spar, it’s a very painful thing. Look at Dow Chemical, which is now seen as the superstar sustainable chemical company. What were its best-known products in the sixties? Napalm, Agent Orange, defoliants. How did they get from there to here – because during the Vietnam War many students didn’t want to work for them, and if you’re a big company and the best and the brightest don’t want to work for you, you have a problem. We’re focusing on the financial sector, showing them that it’s in their interest to look at what they call extra-financial issues: climate change, waste, energy, resource use, human resources management. All of these things ultimately produce better returns with a reduced risk, and if you ask anybody – even cocaine traffickers, criminals – do you want a financial return with a social and environmental added value, it’s pretty hard to find somebody who says no.
But you cannot push the moral imperative to someone who has a target if the two things are in conflict. You have to show that their self-interest aligns with the social and environmental added value. If the financial sector sees money flows going in a certain direction, they’re likely to follow.
I remember when I started, people would ask for research to show that ESG [environmental, social, governance] investing doesn’t underperform and that, at its best, it can outperform. So I stupidly sent out hundreds and hundreds of research papers before I had my ‘aha’ moment: I realized that it wasn’t about proof, it was about belief. How many investors read the research on the risk associated with sub-prime collateralized debt obligations that created the financial meltdowns? Almost nobody. How much money went into it? Everything, because people believed that this was the new way of endlessly making money.
Since the financial meltdown, are you finding finance companies more willing to listen?
Yes, but not as much as I’d like them to.