Want Sustainable Investing? Change Directors’ Duties with Religious Wisdom — Seriously
The conventional model of the company is as a profit maximiser for the benefit of shareholders. This English Law model has been exported globally of course. Not only did it establish a society divisive capitalist v worker set up, but has not led to even great social problem — those which threaten our existence on the planet.
As a former barrister whose work involved enforcing directors’ duties, who then went on to read Economics and Politics at University and a private equity fund manager, the legal deficiencies leading to social externalities are very evident on paper and the reality I’ve experienced.
First, the perception, incorrect as it turns out, of lower returns by incorporating values of sustainable and ESG (environmental social governance) principles, mean we are pitching on a un-even playing field for capital. Whereas if these values were not just for virtue signaling, but more importantly, enshrined in law as directors’ duties, then all would be equal. Indeed, it would have the additional benefit of stopping the cosmetic marketing gimmicks which are not truly ESG ‘compliant’.
Second, it’s often said the company has no soul to kick. Well, if you believe there is a social crisis, then we better give it one. It is not merely it’s articles of association and memorandum. It’s surely moved on and no longer fit for purpose in an interconnected world where trillion dollar businesses can produce world destroying impact. No longer is it about the rights of a few workers down a coal mine. It’s about our survival as a species.
The Guardian newspaper has updated the language it uses when writing about the environment, changing the key term “climate change” to the more urgent “climate crisis.”
Private industry is in a prime position to drive sustainability, particularly as it represents 75 percent of global GDP. A recent United Nations CEO study found that 71 percent of CEOs believe that with increased commitment and action business can play a critical role in contributing to the UN’s Global Goals.
Social pressure would even more effective if there was a legal duty on directors. Royal Dutch Shell was threatened with legal action in 2018 by environmental group Friends of the Earth for committing to invest only 5 percent in sustainable energy despite being labelled one of the world’s 10 biggest carbon emitters.
It should not be left to Friends of the Earth — it should not have been an issue at all as Shell should have had clear obligations to begin with. But what incentive presently except bad press, given they have to hit their quarterly profit targets. As a fund manager — something I am all too well aware of, and as a broadcaster I would be the first to have to criticise them if they failed. All because the law has not caught up with social needs.
The demand from investors is clearly increasing and major banks who can change society by directing capital, are at last educating investors on the economic self interest of investing in ESG companies — so why not enshrine it in law?
We know there is evidence that sustainable investing is in the investors self-interest. So a change to company law and director’s duties would actually be helping wealth creation as well as planet-saving.
Where Does Faith Come Into It?
If you want to put off companies and legislators — mention religion.
Thanks to the Oxford Centre for Hindu Studies, an independent body of Oxford University, I represented a Hindu voice at the EU’s conference on Fundamental Rights of the individual. I also lecture annually at Oxford University on leadership lessons from the Bhagavad Gita to business leaders. Now as the new Chairman of the City Hindus Network (professionals in London who share the religion) I intersect business and faith.
What is striking is in the West we so often talk about rights, not duties. Whereas the Gita talks almost entirely about duties. Duties to society as faith books do.
Let’s take the Zug Guidelines to faith-consistent investing. Surely there must be wisdom of 5,000 years to appropriate. After all, companies are told diversity is good, well diversity of thought is to examine the wisdom of faith too surely.
Say these guidelines: (courtesy of the Bhumi Project who contributed to the UN SDGs in 2015):
“we recognise that Hindu cultures have no governing body, no one scripture, and no one founder. Consequently we have discerned principles from Hinduism’s many religious, spiritual, and philosophical traditions, acknowledging that their practice and understanding.”
Sama-darshana means seeing the equality of all living beings and respecting all life regardless of race, gender, caste, creed or species.
Dharma means to act in such a way that the world around us is nourished. It stems from the mood of service. By seeking our dharma, finding our mission in life, we choose to serve the greater good and develop concern for others.
Ahimsa means to act in a way that causes the least harm.
Yajna is a recognition that we must acknowledge our debt before we can expect reward. It is about a balanced process of give and gain, where to give is the first part of the transaction.
Bhakti — a term only used in relation to the supreme — means to share.
Of course, in making my case, I could leave out faith, or as a lawyer, almost certainly make my case in reference to the texts of Islam, Christianity, Judaism, Jainism, Sikhism and others am sure. And almost certainly even better, taking from each.
To quote the document:
• Sustainable environmental policies and programs, including conservation
of biodiversity, cleaning and recycling, waste reduction, renewable energy
(dharma, ahimsa, bhakti)
• Diversity and inclusion, including community development (samadarshana, dharma, bhakti)
• Transparency in operations and outcomes (yajna, dharma)
• Sustainable technologies and infrastructure (yajna)
• Micro-finance (yajna, dharma)
• Affordable housing (sama-darshana, dharma, bhakti)
• Fair trade, including equal employee welfare and rights, and favourable
supply chain labour practices (sama-darshana, dharma, bhakti)
• Education (dharma)
• Aerospace and defence, including nuclear energy, military armaments and
weapon systems (ahimsa)
• Intoxicants which may include tobacco, alcohol, pharmaceuticals and illegal and legal highs (dharma, ahimsa)
• Animal exploitation and experimentation, including stem cell research
• Social, political, or cultural abuse of castes, genders, races, or creeds
(ahimsa, bhakti, dharma)
• Gambling (dharma)
• Environmental abuse, including pollutants, deforestation, exploitation of
wildlife and its habitat (dharma, ahimsa, bhakti)
• Fossil fuel exploration, exploitation, and production (dharma, bhakti)
• Media promoting pornography, violence, and degradation (dharma)
• Certain medical procedures such as euthanasia and abortion (ahimsa,
The author is a Private Equity CEO, former Barrister and former Visiting Fellow in Business at Corpus Christi College Oxford in Business and Industry. He is a Dealmaker for the UK Government seeking technological solutions to the world’s most pressing problems. Opinions own.