“Capital with purpose” might be seen as today’s en vogue trend by some. But in reality, it’s our last-ditch attempt to salvage society for future generations, says Stefano Montobbio, Head of ESG and governance at EFG Asset Management.
“Ah, if I was your age, how lucky you are to be young!”.
This is a mantra older generations repeat to younger ones, almost everywhere in the world, generation after generation. There is some truth in the sentiment: Besides a longer life ahead, being young should also allow individuals to reap increased benefits from a continuously improving world.
Certainly, over the past century, this would seem to hold true. Decade after decade the world became a better place to live. Fewer wars (sadly not everywhere, but across most of the planet), better health, more wealth and longer life expectancy.
But will this continue to hold muster? Hopefully, the longer life argument still applies, but let’s look further and think about the legacy we are leaving to our children (and theirs).
Running dry
The earth has been exploited beyond its limits and at the expense of future generations. It’s not solely about greenhouse gas emissions. It’s about an agricultural system that to produce a single unit of food energy needs a multiple of fossil fuel energy; it’s about the loss of around 70% of biodiversity over the past 50 years; and it’s about continuous deforestation and increased water scarcity.
To solve these various crises we have created debt and a huge amount of it is almost impossible to pay back. We’ve also had to slash interest rates to protect the economy. In this context of longer lives and lower interests rates, my generation still doesn’t accept they will have to retire later.
Meanwhile, Millennials and Generation Z are faced with higher unemployment and expected stagnant wages – exacerbated further by the pandemic. Add to that the fact they will have no interest on their wealth (plus how could they hope to build it?) and extremely uncertain retirement perspectives, and it paints a bleak picture.
Covid-19 and the many lockdowns have been relatively harsher on younger people, who naturally aspire to more freedom, contact, and exchanges. Paradoxically, they are less at risk from the virus, but were expected to protect the eldest in an act of intergenerational solidarity.
We must ask if in the future we will look back on this period as a time where we robbed nature and future generations of immediate advantages and wealth.
Saving grace?
There are some positives, though. The intellectual and technological knowledge we leave as a legacy to future generations has never been broader. Yet the jury is still out on whether it will be sufficient to compensate or not.
If young people have the impression of being trapped in a life without the same opportunities previous generations had, can we blame them?
Depression, lethargy, anxiety and anger are all possible reactions. In the UK, one in five adults experienced depression in the early part of 2021 – double the rate of one year earlier – and people under the age of 29 were the most affected.[1]
Doing our duty
I’m not a psychologist and unable therefore to judge about the longer-term consequences, but I hope young people will ultimately be able to absorb the stress and pardon the faults of previous generations.
Setting aside the knowledge and intellectual capital previous generations have built, we now have a duty to reinstate more hopeful prospects for the generations to come.
Not only must our way of living and consuming change, but also the way we invest. Capital must be used for a higher purpose than financial return alone; performance should be matched by purpose and outcome, as far as possible. ESG and impact investing are growing in relevance and will continue to do so.
I’m not sure this is enough, but I think this is one of the last chances to improve our legacy and at least partially compensate for what we stole. We owe it to the young.
[1] ONS data from 27 January to 7 March, 2021
