What kind of businesses can drive fairness, equity and good environmental outcomes? Can capitalism deliver and what can government do? How do we measure outcomes and are we even asking the right questions, such as the cost of externalities?
In this fascinating dialogue with one of the world’s deep thinkers on environmental social governance frameworks for investment, ABC journalist David Speers teases out some powerful insights in the reality of investment in a rapidly changing world.
He’s talking to Colin Melvin, founder and managing director of Arkadiko Partners, who was part of the team that coined the term ESG (environmental social governance) and was involved in the development of the United Nations Principles for Responsible Investment.
The interview was a highlight of the annual conference Business Council of Co-operatives and Mutuals, which represents businesses owned by their members (instead of shareholders).
Melina Morrison, chief executive of the council which claims eight out of 10 Australians are members of a mutual or co-operative, said her members types of businesses are 25 per cent more resilient that others and now faced the opportunities to engage in the “global trend towards ever high ESG standards”.
The event, held last week at the Intercontinental Hotel in Sydney, was themed as “The Sustainability Edition” and included speakers such as professor Ross Garnaut who recently published his book Reset through Black Ink Press, Mary Delahunty head of impact for superannuation group HESTA which has nearly 900,000 members and $52 billion in assets, Jacki Johnson, advisor to Insurance Group Australia, Rohan Mead, group managing director and CEO of Australian Unity, Heidi Lee, CEO of Beyond Zero Emissions and Rohan Lund, group CEO of NRMA.
Following is a lightly edited version of the interview.
David Speers: Can we start with your role in coming up with the whole idea of ESG – can you tell us a bit about how it came about? Why did you think that the original concept was needed?
Colin Melvin: ESG was part of the dialogue around the United Nations’ Principles for Responsible Investment. I was involved in that project early on, in 2004, 2005, and I was part of the drafting group. I didn’t come up with the acronym just myself, but with a group of people.
We were considering what we should call all those things that might impact the long-term value of an investment decision, which we weren’t currently considering. That is, the value of the asset we were investing in.
We were looking around for different words, social, environmental, governance and so we came up with the ESG as a shorthand for saying everything that might impact the long-term value of the decision we’re not currently considering.’
Can capitalism help achieve fairness and equality?
DS. I have a quote from you, “Capitalism, as it has functioned through the ’80s, ’90s and early 2000s, was broken, that there’s much more demand for a longer-term trend towards getting back to greater fairness, equality, and opportunity”.
Many would agree with that, but you could also argue this is the role for government, to achieve that sort of fairness and equality itself. Why did you believe that private investors could drive this sort of change, or should drive this sort of change?
It’s not either/or. I think it’s both/and. You need both parties to be participating together and we should remember that government doesn’t legislate in a vacuum.
It’s also very difficult for national governments to control multinational corporations, or to rein them in. Investors can get involved in the setting of policy, or indeed could perhaps do more in that regard, just as companies do. So, we needed both.
Governments have a pretty mixed record, when it comes to actually…