#15: Recap: Why Traditional ESG Isn't Enough & How SCI Offers a Powerful Solution
Why We Need System Change Investing (SCI)
While ESG investing has grown significantly, major environmental, social, and economic challenges persist. These severely threaten businesses, investors, and society as a whole.
Current responsible investing approaches provide many financial and sustainability benefits. But they are not coming close to resolving major challenges and protecting the future prosperity of business and society.
Here's the Problem with Traditional Approaches
Focus on Companies, Not Systems: Current mitigation measures aim to change companies, but barely pay attention to the underlying systems that control them.
Treating Symptoms, Not Root Causes: As a result, they mostly address symptoms like climate change, not the root causes, which can be found in the economic and political systems.
The Thing Is
The System defines the Marching Order: Companies operate within the rules of these systems. These systems currently allow for externalities. They don't hold companies fully responsible for harming the environment and society.
Stuck in flawed Systems: In competitive markets this system configuration makes it virtually impossible for companies to transition to truly sustainable business models. If they voluntarily try, costs usually go up and they ultimately put themselves out of business.
The Obvious Conclusion
The Need for System Reform: Improving these reductionist systems we created is by far the most important sustainability issue. Achieving the SDGs will be impossible without substantially reforming them.
Expanding the Work: No amount of individual company-level work will be enough. It's essential to expand the work and include voluntary, collaborative efforts to create frameworks that foster truly sustainable and financially viable business models.
🌟 System Change Investing has been designed to help with just that.
Engaging the Corporate and Financial Sector
The corporate and financial sectors have the resources and influence to drive the required changes. It's important to remember that these changes are in their own best interest. Only by creating conditions conducive to life will it be possible to protect investments long-term and secure future prosperity.
SCI leverages the power of these sectors by engaging them in a game-changing way.
Emerging Approaches
There's growing recognition of the need for more far-reaching systemic approaches. However, most of the emerging strategies still focus on specific issues (e.g., green energy) or sectors (e.g., sustainable agriculture). While these contribute, they don't directly address root causes.
The Gaps We Need to Bridge
Whole System Framework: We lack a framework that considers all interconnected aspects of society and the natural world. This "reductionist" thinking hinders effective solutions.
Practical, Profitable Strategies: Many current approaches are limited in scope or fail to deliver strong financial returns. We need broadly applicable, return-enhancing SCI strategies.
🚀 The Solution: GSC and SCI
GSC: The Global System Change (GSC) framework provides the necessary whole system perspective to guide effective SCI.
SCI: SCI offers a practical, return-driven approach to engage the financial and corporate sectors in system change.
Stay tuned! Next week's recap dives into GSC and SCI implementation, highlighting the benefits for investors, companies, and society.