Key takeaways from Morgan Stanley’s Sustainable Investing Summit illustrate how companies, investors and governments can pursue systemic solutions to interrelated sustainability problems.
In a year when environmental, social and governance (ESG) issues are at the fore of so many discussions—from systemic racism and the impact of COVID-19 on minority communities to the ongoing challenges posed by climate change and resource allocation—companies, investors and governments have an opportunity to pursue economic goals that also helps create positive social and environmental impact.
At the Sustainable Investing Summit, hosted by the Morgan Stanley Institute for Sustainable Investing and held in October, just how each player in the global economy can best meet these challenges took center stage. The summit virtually brought together corporate executives, institutional investors, academics, nonprofit leaders and policymakers to explore ideas on how to mobilize private and public sector capital for investing in a sustainable world.
Four essential themes emerged: organizational leadership in crisis times, COVID-19 and intersectional ESG issues, the policy and business initiatives to curb climate change and capital markets’ role in social justice.
A year defined by pressing demand for coronavirus relief, racial and social justice and climate change mitigation has challenged organizations everywhere. In crisis times, leaders must express confidence that society will endure and recover, Morgan Stanley’s Chief Executive Officer James Gorman said: “We're [going to] have some rough times but we will get through it. And I think that message of acknowledging things are very difficult but also projecting that you will get through it—that authentic message—is the essence of leading through crisis.”
To advance sustainability issues in business, leaders of organizations large and small have to encourage agility, innovation and diverse perspectives from all levels, said Harvard Business School Professor Linda Hill. Only then can a company, nonprofit or government body expect to create real change and make progress.
Echoing that sentiment, Gorman said that he views his role as identifying thematic changes that may affect business, culture and staff, but relies on others with the passion and expertise to amplify those themes throughout the organization, form a strategy and ultimately execute it.
The pandemic has connected sustainability issues, such as food security and social equality, highlighting the importance of viewing the coronavirus response through an ESG lens.
The pandemic has connected sustainability issues, such as food security and social equality, highlighting the importance of viewing the coronavirus response through an ESG lens. Diversity, for example, has been essential to developing coronavirus vaccines, and will be critical to their distribution, said New York-Presbyterian CEO Dr. Steven Corwin and Moderna’s CEO Stéphane Bancel. The most effective clinical trials rely on a large and diverse sampling of people across race, gender and age, requiring pharmaceutical companies to overcome what Bancel calls “a challenge of having enough diversity in trials.”
Once approved, the success of vaccines depends on broad adoption across many communities to achieve herd immunity. “You can make a lot of doses of a vaccine, but distribution is a complicated logistical problem,” said Dr. Corwin. “Whether it’s a rural hospital in North Dakota or indigenous populations or urban hospitals in NYC—it takes healthcare professionals with relationships to communities to convince them to take a vaccine.”
Alongside responding to the pandemic, addressing climate change also remains one of the biggest threats to the planet, University of California, Berkeley Haas School of Business Professor Laura Tyson and former Australian Prime Minister Kevin Rudd said in their discussion. “Government has to be responsible for setting incentives for the private sector to invest in safeguarding our public good,” said Tyson, citing broader global adoption of a tax on carbon emissions as perhaps the most effective mechanism to curb climate change.
Rudd said that he expected emerging trade policies to push more countries to embrace a carbon tax and, as an example, pointed to the EU’s plans to adopt a carbon border tariff on imports from countries with incompatible carbon-pricing programs. The potential impact on trade with an economic bloc as large and influential as the EU should get everyone’s attention, he said.
The trend could also affect corporates, who may find it harder to convince investors, especially large asset allocators, of their long-term value without demonstrating their ability to manage risks associated with the transition to a low-carbon economy. “The private sector is acting because it accepts science and sees the implications for returns over time, and the risk associated with investments,” Tyson said.
Capital markets still play an essential role in funding sustainable investing solutions for complex ESG issues, including racial inequity, according to Ford Foundation President Darren Walker. “We’re in a post-coronavirus world of reckoning, where racism must be addressed through systemic responses,” he said. “It’s possible for markets to be a mechanism that makes equality more possible.”
In a capitalist system, there will be inequality. But that inequality should have dimensions to it that are reasonable to ensure a larger democratic society is prospering.
One example: In the early stage of pandemic lockdown, Walker urged foundations to tap the public bond market as a nontraditional source of funding. Several nonprofits, including Ford Foundation, the Doris Duke Charitable Foundation and the MacArthur Foundation, issued bonds that enabled investors to fund critical grant-making to smaller nonprofits reeling from funding reductions, even as demand for their services soared amid disproportionate impact of coronavirus on many underserved communities.
Harish Hande, co-founder of SELCO-India, highlighted the impact of profound and widespread poverty in India and the unique, compounding challenges posed in any COVID response. Walker also pushed for a fundamental shift in thinking on how to reconcile democracy and capitalism. He cited certain U.S. systems that contribute to inequities, such as advantageous tax policies or legacy college admissions, as examples of a need to differentiate between having and having too much. “In a capitalist system, there will be inequality,” Walker says. “But that inequality should have dimensions to it that are reasonable to ensure a larger democratic society is prospering.”
Watch the full recordings of each summit session:
- The Case for Sustainable Investing Leadership and Strategic and Systemic Innovation in Uncertain Times1
- The Pandemic and Our Future2
- The Roles of Business and Policy in Responding to Climate Change3
- A Global Conversation on Equity, Inclusion and Sustainability4
Read more insights from the Morgan Stanley Sustainable Investing Summit.