A strange beast that goes after profits

After two hours of debate in the Ethos Institute 2008 International Conference panel “Finance Management for Sustainable Development”, moderator John Elkington, founder of SustainAbility, said that he forecasts a very worrying economic scenario for the next two years, which requires the urgent implementation of a sustainable agenda. “Some pieces are missing from this game. Corporate citizenship is still too much institutionalized. Money is a strange beast that kicks and migrates to other places. Now China is the country that is accumulating wealth. How can this agenda be set?” The challenge is presented.

In the debate, participants agreed that the financial sector still has a long way to go towards sustainability, although the sustainable development funds are becoming an increasingly palpable reality. According to the figures presented by Eric Leenson, President and CEO of Progressive Asset Management, Inc. (PAM), in 2007 there were 3 trillion dollars in assets allocated to these funds in the United States only. “Reasonable growth,” jokes Leenson, reckoning the increase they had in just over two decades. In 1984, the amount invested was only 40 billion dollars.

Besides the mentality shift in companies, which nowadays recognize the relevance of this type of fund, Leenson detects the growing demand for investment in the communities, ranging from microfinancing to urbanization works. The PAM representative says that, in the last 25 years, billions of dollars have been allocated in this direction and that the sector holds 11% of all money invested in the United States. “From 1995 to 2007, the investment in communities rose from 4 to 25 billion dollars. And the reason for this increase is that the investment also funds consumption,” argues Leenson.

Ricardo Henriques, advisor to the president of BNDES (Brazilian Development Bank), talked about the need to rethink the business models, so that the entire value chain of the sector can become sustainable. “In this world weakened by huge social inequality, which is more critical in Brazil, it is possible to seek economic gains and advantages that have low negative impact and earn return for all,” says Henriques. He believes the main problem is how to achieve more balance in this scenario between the relevance of the economic aspect and the social and environmental aspects of the investment, currently economically-oriented. The challenge, says Henriques, is to know how to bring to the management strategy the ability to add value along the entire financial system’s production chain. “Is it possible to earn return in the communities where I operate without measuring the impact on the surroundings?”, asks he.

Antonio Jacinto Matias, senior vice-president of Banco Itaú and executive-director of Febraban (Brazilian Federation of Bank Associations), which represents the Brazilian financial system, listed a number of sustainable actions supported by the banks, ranging from social investments – such as the construction of 29,000 cisterns in the Semi-Arid Region – to projects that value diversity, to carbon market and microfinancing. He agrees, however, that these are one-off practices and there is a lot to be done by the banks. Matias proposes to use the soundness, efficiency and the well-known good practices of this sector to set “a positive agenda, with transparent solutions.”

According to Ricardo Henriques, of BNDES, what is at stake in the financial system is the way to organize its economic and production agenda, in view of “our huge social debt.” Despite the “enormous resistance” to the internalization of social and environmental variables, Henriques believes banks can better allocate the resources that the society reasonably says are disproportionate to the profit they make.

“If we keep last Century’s model, which caused this mammoth inequality, we’ll run the risk of rupture,” foresees the economist. The way out would be redefining the scope of the public sector. “Is the private sector a partner of this redefined public sector or not? Is the financial sector a partner in this redefined scope or not?,” provokes Henriques. He believes the enhancement of the public sector demands valuing the differences and requires a “quite sophisticated” political stance.

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