Source >>><\/a><\/h3>\n\n\n\nNow comes the hard part\u2026. Plumbing<\/h2>\n\n\n\n![\"Clara](\"https:\/\/747469.smushcdn.com\/2463591\/wp-content\/uploads\/2021\/09\/avatar_user_11883_1631410551-100x100.jpg?lossy=1&strip=1&webp=1\")
<\/a><\/figure>\n\n\n\nClara Miller<\/a>-January 17, 2022<\/p>\n\n\n\n- Share on LinkedIn<\/a><\/li>
- Share on Twitter<\/a><\/li>
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- Share on Email<\/a><\/li><\/ul>\n\n\n\n
![\"Clara](\"https:\/\/747469.smushcdn.com\/2463591\/wp-content\/uploads\/2022\/01\/Clara-Miller-Plumbing-FEATURED.jpg?lossy=1&strip=1&webp=1\")
<\/figure>\n\n\n\nI am, in a minor way, an investor, and while I value investment capital\u2019s role, I know that capital is not uniquely important to achieving the SDGs. Nor are big numbers alone. As seductive as billionaires\u2019 and the finance sector\u2019s star power may be for soothing our nerves in these grim times, investment capital will be useless if we see it as an isolated mechanism of change.<\/p>\n\n\n\n
Gillian Marcelle wrote, \u201cFinance is not the binding constraint,\u201d in a December 2021 post addressing the COP26 announcement of a consortium commitment of $130 trillion against climate change. She cited the broader context of investment, such as financial eco-systems and hard infrastructure. I second Dr. Marcelle in cheering them on and raising the stakes.<\/p>\n\n\n\n
Investment capital will be useless if we see it as an isolated mechanism of change.<\/p><\/blockquote>\n\n\n\n
When Mark Carney announced the $130 trillion commitment of GFANZ<\/a>, he said, \u201cWe now have the essential plumbing in place to move climate change from the fringes to the forefront of finance.\u201d While I am an ardent fan of Mr. Carney, I beg to differ. He has a big capital consortium. But the plumbing \u2014invisible, undervalued, pervasive, and necessary, as it now exists, is unsound.<\/p>\n\n\n\nAnnouncing capital availability isn\u2019t the hard part. Performance at the enterprise level is the hard part. But it\u2019s doable. This will require skirting deadly perils, embracing down-to-earth saving graces, and investing in the unglamorous work of fixing the plumbing.<\/p>\n\n\n\n
The plumbing \u2014invisible, undervalued, pervasive, and necessary, as it now exists, is unsound.<\/p><\/blockquote>\n\n\n\n
Deadly Peril #1: Imagining that Capital Availability is the Big Lift\u2026 It\u2019s Not<\/h4>\n\n\n\n
The $130 trillion announcement at COP 26 seemed almost routine: another day, another massive public commitment of capital disconnected from the market. Ho-hum. Where are the deals? The disbursements? The performance metrics for the investments, projects, and enterprises that will put the capital to work?<\/p>\n\n\n\n
This apparent victory of talk over walk reminds me of my years in the community development world in the 1980\u2019s and 90\u2019s. Then, as now, a drumbeat of large, very public \u201csoft commitments,\u201d to disinvested communities by large banks were a ritual. Then, as now, they were met with universal applause.<\/p>\n\n\n\n![\"Sculpture](\"https:\/\/747469.smushcdn.com\/2463591\/wp-content\/uploads\/2022\/01\/Clara-Miller-Plumbing-04-800x533.jpg?lossy=1&strip=1&webp=1\")
<\/figure>\n\n\n\nWhen the limelight faded, however, those of us on the ground saw that the bold talk did, too. Announcements of \u201cmoney disbursed\u201d were rare. Financings were stop\/start and slow. Today\u2019s announcements and subsequent silences are unnervingly similar.<\/p>\n\n\n\n
Is it possible that financial institutions, asset managers, and global DFIs approach the ESG market the same way as U.S. money center banks did (and do) for community development? Maybe for them, SDG investment is a troublesome aberration, separate from and unrelated to the real business of finance, similar to the way that \u201ccommunity development finance\u201d is viewed as separate from the real business of large financial institutions.<\/p>\n\n\n\n
That would be unfortunate. We have real work to do.<\/p>\n\n\n\n
Saving Grace: Engage \u2014 and Pledge \u2014 Capital with the Enterprise Level in Mind<\/h5>\n\n\n\n
Capital, alone, has no agency. Enterprises, as organizing machines for both capital and revenue have agency. Their business models, employees, customers, products, supply chains, and services spin money into impact. As Henry Fernandez, CEO of MSCI, noted in an interview: \u201cThe heavy lifting on solving the climate change problems of the world is going to be at the operating company level.<\/a>\u201c<\/p>\n\n\n\n![\"Pieces](\"https:\/\/747469.smushcdn.com\/2463591\/wp-content\/uploads\/2022\/01\/Clara-Miller-Plumbing-03-400x600.jpg?lossy=1&strip=1&webp=1\")
<\/figure>\n\n\n\nAnd it\u2019s complicated there, as Paul Hawkins reminds us<\/a>: \u201cEvery industry is a system, and\u2026 [is] extractive, whether it be energy, food, agriculture, pharma, transport, clothing, or healthcare\u2026. Greenhouse gas emissions are created by an extraordinary variety of activities, from machining to smelting, rail systems to refining, air freight to office towers. Energy-intensive processes involve chemical, physical, electrical, and mechanical procedures. The external impacts \u2026 include \u2026 pollution, toxic emissions, poverty wages, loss of biodiversity, deforestation, destruction of Indigenous cultures, and advertising that encourages overconsumption.\u201d<\/p>\n\n\n\nSo while investors are influential, it is people in enterprises who will problem-solve to reach carbon and SD goals. A skillful capital provider understands what capital can and cannot do and structures investment for maximum utility on the ground. Executives, managers, employees, and customers are the ones who make it happen in the complex environment of each enterprise.<\/p>\n\n\n\n
I would love to think that the $130 trillion commitment might remove \u201ccapital availability\u201d from the \u201cgood and the great\u2019s\u201d long list of excuses for not moving forward. And that the most skilled bankers are looking at the enterprise level when designing financial instruments, identifying markets, and crafting deals. Without creative bankers placing capital in actual businesses on the ground, the $130 trillion will have little impact.<\/p>\n\n\n\n
Without creative bankers placing capital in actual businesses on the ground, the $130 trillion will have little impact.<\/p><\/blockquote>\n\n\n\n
Deadly Peril #2: Ignoring Revenue (and Expense)<\/h4>\n\n\n\n
Enterprises need reliable, repeatable net revenue for financial sustainability. In my experience, the hurdle to capital investment in the abandoned markets of my community development days was more likely to be lack of revenue than lack of capital.<\/p>\n\n\n\n
And while capital builds and rebuilds the enterprise engine, revenue is the fuel. Its absence stymies investors as well as managers. Even if a given enterprise makes a net positive contribution to the SDGs, it will fold without profits from net revenue.<\/p>\n\n\n\n
While capital builds and rebuilds the enterprise engine, revenue is the fuel.<\/p><\/blockquote>\n\n\n\n
Returns and exits require net revenue, too. Is revenue flowing in? Are there committed retail buyers? That revenue will magnetize capital investment.<\/p>\n\n\n\n
Saving Grace: SDG Positive Revenue Commitments from Government and Big Companies<\/h5>\n\n\n\n
Today, investors and underwriters may mistrust the revenue visibility of SDG-friendly and ESG-positive business models. Perceived risk means investors stay on the sidelines (and continue public announcements of capital availability all the while).<\/p>\n\n\n\n
Enter government. At times of uncertainty \u2014 during wars, for example, or disasters, or when technology is untried \u2014 government is the go-to source of reliable revenue (and capital). Government subsidy has been standard in American capitalism from our earliest days. Today, The U.S. government is the largest purchaser of goods and services on the planet<\/a>, providing over half a trillion dollars in revenue to businesses annually. The long list of for-profit companies that rely on government include Amazon, Boeing, Intel, Exxon, Tesla, and Google.<\/p>\n\n\n\n![\"Person](\"https:\/\/747469.smushcdn.com\/2463591\/wp-content\/uploads\/2022\/01\/Clara-Miller-Plumbing-02-800x533.jpg?lossy=1&strip=1&webp=1\")
<\/figure>\n\n\n\nThis is a time to buy as well as to invest for the long term, where returns accrue to the common good over generations. This is a time for that multi-generational perspective if there ever was one.<\/p>\n\n\n\n
If governments, domestic and foreign, redesign both subsidies (e.g., tax abatements) and revenue (grants, purchasing policies, and contracts) to support companies working toward SDG goals, capital will flow. Beyond government, large companies themselves can commit to purchasing vehicles, services, food, and more \u2014 that incentivizes progress toward the SDGs.<\/p>\n\n\n\n
Deadly Peril #3: Ignore Invisible Forces<\/h4>\n\n\n\n
Are markets subject only to natural, immutable rules? Is \u201ccapitalism\u201d of the unfettered variety controlled only by the financial equivalent of the laws of physics? No. It\u2019s not true now (and wasn\u2019t even true in the world of Adam Smith).<\/p>\n\n\n\n
Regulation, culture, customs, algorithms, subsidies, behavior, technological change, consumer and investor whim, and similar social constructs are the muscles and lifeblood of the \u201cinvisible hand, \u201d not a mystical, superhuman sovereign force. While quants may find ways to manipulate market metrics this only demonstrates that they are man-made. \u201cFree\u201d is a fanciful and deceptive mask when it comes to global markets.<\/p>\n\n\n\n
Putting aside the operational challenges to the economic transformation we seek \u2014 such as capital availability, revenue visibility, and rapid technical change \u2014 the barriers of culture, custom, and cowardice loom large. The invisible structures of the economy are very much with us, and comfortable inertia prevails, notwithstanding the urgency and wisdom of fundamental change.<\/p>\n\n\n\n
Saving Grace: Explicitly Change the Rules Up and Down the Global Economy<\/h5>\n\n\n\n
Here are three ideas \u2014 none of them new \u2014 for re-plumbing our economy, changes that will help fulfill the promise of GFANZs extraordinary pledge. Without change, all the brave talk, public capital commitments, and assurances of net-zero or carbon negative operations will fail. Capital investors will be unable to make good deals; fiduciaries will continue to cower behind a failed construct; and corporate leaders, stymied by uncertainty when working to meet ESG goals, will dither.<\/p>\n\n\n\n
Fiduciary Duty<\/strong>: There is much earnest talk about ESG emanating from large asset owners such as pension funds and asset managers. But when the moment comes to do a deal that deviates from \u201cbusiness as usual,\u201d there is a scurrying sound as managers and lawyers take shelter behind the superstitions guiding \u201cfiduciary duty.\u201d Endowed, mission-centric organizations such as foundations and universities, as well as publicly chartered development finance institutions cling to \u201cfiduciary duty,\u201d to excuse the environmental, human rights, or community damage done by the companies and projects they invest in.<\/p>\n\n\n\nBusiness as usual is not compliant with fiduciary duty, especially now. The ground has shifted, and a petrified view of fiduciary duty is a danger to clients, plain and simple. This is not new. As a top Goldman Sachs executive noted a few years ago: \u201cESG is simply commonsense 21st Century risk management.\u201d And ESG investing is commonsense fiduciary duty.<\/p>\n\n\n\n
The ground has shifted, and a petrified view of fiduciary duty is a danger to clients, plain and simple.<\/p><\/blockquote>\n\n\n\n
Time Horizon<\/strong>: It\u2019s pervasive. Build-in time limits in products, including financial products, are invisible. Is a risk financially material to a business if it will harm profits in one year? Three? Five? Does climate change pose material risk to a homebuilder this year? An oil company? An insurance company? Short-termism in investment management, coupled with standard profitability assumptions, useful life expectations, accounting rules, taxation, management strategy, and most importantly, board governance protocols undermine progress toward the deep investments we must make now. If rating agencies, managers, legislators, regulators, actuaries, and accountants modify \u2014 or at least examine \u2014 built-in assumptions that undermine real risk management, we can make progress. Without change, we\u2019ll be stuck with more deception and stalling.<\/p>\n\n\n\n![\"Scaffolding\"](\"https:\/\/747469.smushcdn.com\/2463591\/wp-content\/uploads\/2022\/01\/Clara-Miller-Plumbing-01-800x533.jpg?lossy=1&strip=1&webp=1\")
<\/figure>\n\n\n\nFinance and Accounting Rules<\/strong>: The accounting world has made hard-fought progress on encompassing ESG in reporting standards: the Value Reporting Foundation notes that over half of the Global S & P 1200 now reports on ESG topics using SASB metrics in their external reporting to investors. As with all progress, there\u2019s still work to do. Administrators, regulators, and legislators must change the rules of banking, insurance, real estate, and securities markets to accommodate an amended reckoning of risk and return, starting from SASB and broadening from shareholder to stakeholder topics.<\/p>\n\n\n\nIt will take extraordinary pressure for Congress to act where necessary here in the United States, and it won\u2019t happen without concerted effort from business lobbyists. Maybe just a billion of that $130 trillion can be applied to investment in political muscle, social capital, and rewriting the rules.<\/p>\n\n\n\n
The problem isn\u2019t ESG, it\u2019s BAU.<\/h4>\n\n\n\n
It\u2019s a myth, of course, that investors with financial capital can act alone to make change. Capital is influential and catalytic, but it can have no direct impact \u2014 positive or negative \u2014 if it lacks an entity to invest in, such as an enterprise, project, product, or program. Enterprises, in turn, are doomed without customers (and products and revenue). And the products and revenue from sales won\u2019t materialize without employees and managers to run the operation. Nothing happens without all the parts of that system turning over \u2014even when capital is in ample supply.<\/p>\n\n\n\n
In any and all ways we can, we must, help carbon negative and human positive enterprises dominate the global economy.<\/p><\/blockquote>\n\n\n\n
As investors, we can\u2019t afford to view capital investment in isolation. We, too, must lobby governments for ESG market regulations, advocate for accounting and fiduciary rule and regulation changes, buy green, work to help create a business environment where our investees and supply chain businesses can succeed, and recalibrate our own enterprises. In other words, in any and all ways we can, we must, help carbon negative and human positive enterprises dominate the global economy. Large announcements of capital availability won\u2019t get us there.<\/p>\n\n\n\n
The rules, culture, and rituals of the current market \u2014 its plumbing, as Mr. Carney would put it \u2014 has failed us, and it\u2019s time to reckon with that reality. To paraphrase Walt Kelly\u2019s Pogo, \u201cWe have met the plumbing and he is us (and he needs to be fixed).\u201d<\/p>\n\n\n\n
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![\"Clara](\"https:\/\/747469.smushcdn.com\/2463591\/wp-content\/uploads\/2021\/09\/avatar_user_11883_1631410551-170x170.jpg?lossy=1&strip=1&webp=1\")
<\/a><\/figure>\n\n\n\nClara Miller<\/a>Clara Miller writes, speaks and advises on finance, investing, and accounting. She is President Emerita of the Heron Foundation (2011-2017) and was founder and President\/CEO of Nonprofit Finance Fund (1984-2011). She serves\/has served on and chaired a number of boards and advisory boards, including the U.S. Treasury (CDFI), Federal Reserve \u2026 Read more<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"18 JANUARY 2022 : 1H7TJ Source >>> Now comes the hard part\u2026. Plumbing Clara Miller-January 17, 2022 …
<\/a><\/figure>\n\n\n\nClara Miller<\/a>-January 17, 2022<\/p>\n\n\n\n I am, in a minor way, an investor, and while I value investment capital\u2019s role, I know that capital is not uniquely important to achieving the SDGs. Nor are big numbers alone. As seductive as billionaires\u2019 and the finance sector\u2019s star power may be for soothing our nerves in these grim times, investment capital will be useless if we see it as an isolated mechanism of change.<\/p>\n\n\n\n Gillian Marcelle wrote, \u201cFinance is not the binding constraint,\u201d in a December 2021 post addressing the COP26 announcement of a consortium commitment of $130 trillion against climate change. She cited the broader context of investment, such as financial eco-systems and hard infrastructure. I second Dr. Marcelle in cheering them on and raising the stakes.<\/p>\n\n\n\n Investment capital will be useless if we see it as an isolated mechanism of change.<\/p><\/blockquote>\n\n\n\n When Mark Carney announced the $130 trillion commitment of GFANZ<\/a>, he said, \u201cWe now have the essential plumbing in place to move climate change from the fringes to the forefront of finance.\u201d While I am an ardent fan of Mr. Carney, I beg to differ. He has a big capital consortium. But the plumbing \u2014invisible, undervalued, pervasive, and necessary, as it now exists, is unsound.<\/p>\n\n\n\n Announcing capital availability isn\u2019t the hard part. Performance at the enterprise level is the hard part. But it\u2019s doable. This will require skirting deadly perils, embracing down-to-earth saving graces, and investing in the unglamorous work of fixing the plumbing.<\/p>\n\n\n\n The plumbing \u2014invisible, undervalued, pervasive, and necessary, as it now exists, is unsound.<\/p><\/blockquote>\n\n\n\n The $130 trillion announcement at COP 26 seemed almost routine: another day, another massive public commitment of capital disconnected from the market. Ho-hum. Where are the deals? The disbursements? The performance metrics for the investments, projects, and enterprises that will put the capital to work?<\/p>\n\n\n\n This apparent victory of talk over walk reminds me of my years in the community development world in the 1980\u2019s and 90\u2019s. Then, as now, a drumbeat of large, very public \u201csoft commitments,\u201d to disinvested communities by large banks were a ritual. Then, as now, they were met with universal applause.<\/p>\n\n\n\n When the limelight faded, however, those of us on the ground saw that the bold talk did, too. Announcements of \u201cmoney disbursed\u201d were rare. Financings were stop\/start and slow. Today\u2019s announcements and subsequent silences are unnervingly similar.<\/p>\n\n\n\n Is it possible that financial institutions, asset managers, and global DFIs approach the ESG market the same way as U.S. money center banks did (and do) for community development? Maybe for them, SDG investment is a troublesome aberration, separate from and unrelated to the real business of finance, similar to the way that \u201ccommunity development finance\u201d is viewed as separate from the real business of large financial institutions.<\/p>\n\n\n\n That would be unfortunate. We have real work to do.<\/p>\n\n\n\n Capital, alone, has no agency. Enterprises, as organizing machines for both capital and revenue have agency. Their business models, employees, customers, products, supply chains, and services spin money into impact. As Henry Fernandez, CEO of MSCI, noted in an interview: \u201cThe heavy lifting on solving the climate change problems of the world is going to be at the operating company level.<\/a>\u201c<\/p>\n\n\n\n And it\u2019s complicated there, as Paul Hawkins reminds us<\/a>: \u201cEvery industry is a system, and\u2026 [is] extractive, whether it be energy, food, agriculture, pharma, transport, clothing, or healthcare\u2026. Greenhouse gas emissions are created by an extraordinary variety of activities, from machining to smelting, rail systems to refining, air freight to office towers. Energy-intensive processes involve chemical, physical, electrical, and mechanical procedures. The external impacts \u2026 include \u2026 pollution, toxic emissions, poverty wages, loss of biodiversity, deforestation, destruction of Indigenous cultures, and advertising that encourages overconsumption.\u201d<\/p>\n\n\n\n So while investors are influential, it is people in enterprises who will problem-solve to reach carbon and SD goals. A skillful capital provider understands what capital can and cannot do and structures investment for maximum utility on the ground. Executives, managers, employees, and customers are the ones who make it happen in the complex environment of each enterprise.<\/p>\n\n\n\n I would love to think that the $130 trillion commitment might remove \u201ccapital availability\u201d from the \u201cgood and the great\u2019s\u201d long list of excuses for not moving forward. And that the most skilled bankers are looking at the enterprise level when designing financial instruments, identifying markets, and crafting deals. Without creative bankers placing capital in actual businesses on the ground, the $130 trillion will have little impact.<\/p>\n\n\n\n Without creative bankers placing capital in actual businesses on the ground, the $130 trillion will have little impact.<\/p><\/blockquote>\n\n\n\n Enterprises need reliable, repeatable net revenue for financial sustainability. In my experience, the hurdle to capital investment in the abandoned markets of my community development days was more likely to be lack of revenue than lack of capital.<\/p>\n\n\n\n And while capital builds and rebuilds the enterprise engine, revenue is the fuel. Its absence stymies investors as well as managers. Even if a given enterprise makes a net positive contribution to the SDGs, it will fold without profits from net revenue.<\/p>\n\n\n\n While capital builds and rebuilds the enterprise engine, revenue is the fuel.<\/p><\/blockquote>\n\n\n\n Returns and exits require net revenue, too. Is revenue flowing in? Are there committed retail buyers? That revenue will magnetize capital investment.<\/p>\n\n\n\n Today, investors and underwriters may mistrust the revenue visibility of SDG-friendly and ESG-positive business models. Perceived risk means investors stay on the sidelines (and continue public announcements of capital availability all the while).<\/p>\n\n\n\n Enter government. At times of uncertainty \u2014 during wars, for example, or disasters, or when technology is untried \u2014 government is the go-to source of reliable revenue (and capital). Government subsidy has been standard in American capitalism from our earliest days. Today, The U.S. government is the largest purchaser of goods and services on the planet<\/a>, providing over half a trillion dollars in revenue to businesses annually. The long list of for-profit companies that rely on government include Amazon, Boeing, Intel, Exxon, Tesla, and Google.<\/p>\n\n\n\n This is a time to buy as well as to invest for the long term, where returns accrue to the common good over generations. This is a time for that multi-generational perspective if there ever was one.<\/p>\n\n\n\n If governments, domestic and foreign, redesign both subsidies (e.g., tax abatements) and revenue (grants, purchasing policies, and contracts) to support companies working toward SDG goals, capital will flow. Beyond government, large companies themselves can commit to purchasing vehicles, services, food, and more \u2014 that incentivizes progress toward the SDGs.<\/p>\n\n\n\n Are markets subject only to natural, immutable rules? Is \u201ccapitalism\u201d of the unfettered variety controlled only by the financial equivalent of the laws of physics? No. It\u2019s not true now (and wasn\u2019t even true in the world of Adam Smith).<\/p>\n\n\n\n Regulation, culture, customs, algorithms, subsidies, behavior, technological change, consumer and investor whim, and similar social constructs are the muscles and lifeblood of the \u201cinvisible hand, \u201d not a mystical, superhuman sovereign force. While quants may find ways to manipulate market metrics this only demonstrates that they are man-made. \u201cFree\u201d is a fanciful and deceptive mask when it comes to global markets.<\/p>\n\n\n\n Putting aside the operational challenges to the economic transformation we seek \u2014 such as capital availability, revenue visibility, and rapid technical change \u2014 the barriers of culture, custom, and cowardice loom large. The invisible structures of the economy are very much with us, and comfortable inertia prevails, notwithstanding the urgency and wisdom of fundamental change.<\/p>\n\n\n\n Here are three ideas \u2014 none of them new \u2014 for re-plumbing our economy, changes that will help fulfill the promise of GFANZs extraordinary pledge. Without change, all the brave talk, public capital commitments, and assurances of net-zero or carbon negative operations will fail. Capital investors will be unable to make good deals; fiduciaries will continue to cower behind a failed construct; and corporate leaders, stymied by uncertainty when working to meet ESG goals, will dither.<\/p>\n\n\n\n Fiduciary Duty<\/strong>: There is much earnest talk about ESG emanating from large asset owners such as pension funds and asset managers. But when the moment comes to do a deal that deviates from \u201cbusiness as usual,\u201d there is a scurrying sound as managers and lawyers take shelter behind the superstitions guiding \u201cfiduciary duty.\u201d Endowed, mission-centric organizations such as foundations and universities, as well as publicly chartered development finance institutions cling to \u201cfiduciary duty,\u201d to excuse the environmental, human rights, or community damage done by the companies and projects they invest in.<\/p>\n\n\n\n Business as usual is not compliant with fiduciary duty, especially now. The ground has shifted, and a petrified view of fiduciary duty is a danger to clients, plain and simple. This is not new. As a top Goldman Sachs executive noted a few years ago: \u201cESG is simply commonsense 21st Century risk management.\u201d And ESG investing is commonsense fiduciary duty.<\/p>\n\n\n\n The ground has shifted, and a petrified view of fiduciary duty is a danger to clients, plain and simple.<\/p><\/blockquote>\n\n\n\n Time Horizon<\/strong>: It\u2019s pervasive. Build-in time limits in products, including financial products, are invisible. Is a risk financially material to a business if it will harm profits in one year? Three? Five? Does climate change pose material risk to a homebuilder this year? An oil company? An insurance company? Short-termism in investment management, coupled with standard profitability assumptions, useful life expectations, accounting rules, taxation, management strategy, and most importantly, board governance protocols undermine progress toward the deep investments we must make now. If rating agencies, managers, legislators, regulators, actuaries, and accountants modify \u2014 or at least examine \u2014 built-in assumptions that undermine real risk management, we can make progress. Without change, we\u2019ll be stuck with more deception and stalling.<\/p>\n\n\n\n Finance and Accounting Rules<\/strong>: The accounting world has made hard-fought progress on encompassing ESG in reporting standards: the Value Reporting Foundation notes that over half of the Global S & P 1200 now reports on ESG topics using SASB metrics in their external reporting to investors. As with all progress, there\u2019s still work to do. Administrators, regulators, and legislators must change the rules of banking, insurance, real estate, and securities markets to accommodate an amended reckoning of risk and return, starting from SASB and broadening from shareholder to stakeholder topics.<\/p>\n\n\n\n It will take extraordinary pressure for Congress to act where necessary here in the United States, and it won\u2019t happen without concerted effort from business lobbyists. Maybe just a billion of that $130 trillion can be applied to investment in political muscle, social capital, and rewriting the rules.<\/p>\n\n\n\n It\u2019s a myth, of course, that investors with financial capital can act alone to make change. Capital is influential and catalytic, but it can have no direct impact \u2014 positive or negative \u2014 if it lacks an entity to invest in, such as an enterprise, project, product, or program. Enterprises, in turn, are doomed without customers (and products and revenue). And the products and revenue from sales won\u2019t materialize without employees and managers to run the operation. Nothing happens without all the parts of that system turning over \u2014even when capital is in ample supply.<\/p>\n\n\n\n In any and all ways we can, we must, help carbon negative and human positive enterprises dominate the global economy.<\/p><\/blockquote>\n\n\n\n As investors, we can\u2019t afford to view capital investment in isolation. We, too, must lobby governments for ESG market regulations, advocate for accounting and fiduciary rule and regulation changes, buy green, work to help create a business environment where our investees and supply chain businesses can succeed, and recalibrate our own enterprises. In other words, in any and all ways we can, we must, help carbon negative and human positive enterprises dominate the global economy. Large announcements of capital availability won\u2019t get us there.<\/p>\n\n\n\n The rules, culture, and rituals of the current market \u2014 its plumbing, as Mr. Carney would put it \u2014 has failed us, and it\u2019s time to reckon with that reality. To paraphrase Walt Kelly\u2019s Pogo, \u201cWe have met the plumbing and he is us (and he needs to be fixed).\u201d<\/p>\n\n\n\n Clara Miller<\/a>Clara Miller writes, speaks and advises on finance, investing, and accounting. She is President Emerita of the Heron Foundation (2011-2017) and was founder and President\/CEO of Nonprofit Finance Fund (1984-2011). She serves\/has served on and chaired a number of boards and advisory boards, including the U.S. Treasury (CDFI), Federal Reserve \u2026 Read more<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" 18 JANUARY 2022 : 1H7TJ Source >>> Now comes the hard part\u2026. Plumbing Clara Miller-January 17, 2022 … <\/figure>\n\n\n\nDeadly Peril #1: Imagining that Capital Availability is the Big Lift\u2026 It\u2019s Not<\/h4>\n\n\n\n
<\/figure>\n\n\n\nSaving Grace: Engage \u2014 and Pledge \u2014 Capital with the Enterprise Level in Mind<\/h5>\n\n\n\n
<\/figure>\n\n\n\nDeadly Peril #2: Ignoring Revenue (and Expense)<\/h4>\n\n\n\n
Saving Grace: SDG Positive Revenue Commitments from Government and Big Companies<\/h5>\n\n\n\n
<\/figure>\n\n\n\nDeadly Peril #3: Ignore Invisible Forces<\/h4>\n\n\n\n
Saving Grace: Explicitly Change the Rules Up and Down the Global Economy<\/h5>\n\n\n\n
<\/figure>\n\n\n\nThe problem isn\u2019t ESG, it\u2019s BAU.<\/h4>\n\n\n\n
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