#52: US Sustainability Reversion – How SCI helps
The new US administration is scaling back environmental and social protections built up over the past 75 years. This business-first philosophy will increase short-term profits in some cases, as companies are given more freedom to harm the environment and society.
However, degrading that which enables business and the economy to exist inevitably will harm investors and companies. This post discusses how SCI helps to restore protections that are essential for a thriving economy and society.
Causes of Deregulation
Two main factors driving the scale back of environmental and social protections are: public division and inappropriate influence of government.
Public Division. Since removal of the Fairness Doctrine in 1987, media has been allowed to promote false or misleading ideas (i.e. lie) without rebuttal. As a result, more than a generation of US citizens were raised under vested interest deceptions, such as climate change is not real, social welfare is the main cause of high taxes, and environmental protection inhibits job creation.
Conservative and liberal media regularly blamed problems on the other team or party. This created strong divisions in society. It often made citizens unable to work together on their many common interests, such as protecting environmental life support systems, ensuring that each citizen has equal influence over government (i.e. democracy), and using the public wealth to equally and fairly benefit all citizens.
Dividing citizens and misleading them into believing inaccurate ideas greatly inhibits their power to rule themselves and promote the general welfare (i.e. the most important goal stated in the US Constitution). Dividing and disempowering the public enables vested interests to implement deregulation and other programs that put profits and investment returns ahead of the well-being of society. As noted, this can increase short term profits. But it will inevitably harm investors, companies and society.
Inappropriate Influence of Government. Since the late 1970s, campaign finance laws have been greatly weakened in the US. Citizens and companies are now allowed to make unlimited, anonymous political donations. The vast majority of elections are won by the candidate who spends the most money.
This system empowers those who make large political donations to strongly influence government. It enables vested interests to compel politicians to remove environmental and social protections that restrict profits and investment returns.
How SCI Helps to Restore Essential Protections
Children need rules to grow up well. The same is true for companies. If they are allowed to harm the environment and society, competitive pressure often will compel them to do so when it increases profits. Sophisticated companies understand that degrading that which sustains business is not sustainable. They see that regulations which prohibit harm are essential for business and societal well-being.
SCI rewards companies that drive positive systemic changes and penalizes those who oppose them. The approach rates companies on system change performance and shifts investments to system change leaders.
Two major SCI metric categories are uniting and empowering citizens and influencing government. Companies that deceive and divide citizens (e.g. through deceptive media) receive lower SCI scores. Those who tell the truth and empower citizens receive higher scores.
In the government influence area, companies that influence government to remove environmental and social protections receive lower scores, while those using their influence to drive sustainability-promoting systemic changes get higher ones.
Companies that see the big picture and understand need for system change are more sophisticated. Like ESG leaders, they usually outperform in many areas, and thereby achieve superior financial performance.
Through SCI, investors can enhance financial performance while strongly driving essential systemic changes.
For more information about SCI, visit our website SystemChangeInvesting.com or listen to this recent SCI podcast.
SCI will be presented at a 13 February Pensions for Purpose event: Navigating systemic risks: the role of institutional investors in building a stable economic future
