Sustainability is the Business Model: What's Missing From the Conversation

I recently read an insightful piece in the Financial Times, but I felt like it was missing the bigger picture. There are significant developments in the private markets that are often overlooked in the Environment, Social, and Governance (ESG) and sustainability conversation. These developments show that true ESG investments can thrive and deliver tangible results.

There's also a shift in where capital flows are heading, with a growing focus on sustainability. Whether we call it ESG or simply investments that generate real value and lay the foundation for groundbreaking innovations and business models, the focus should be on creating a sustainable economy. However, the discussion tends to be overly centered on public markets.

Both public and private markets, along with policy, play essential roles. Even if some of these private market investments do not have the same size or scale as what we see in public markets, they need to be part of the analysis. We need the media to inspire a different kind of narrative.

For example, funds like WaterEquity, LeapFrog Investments, Generation Investment Management , the Soros Economic Development Fund, Patagonia Works' Tin Shed Ventures, Acumen Capital Partners , Blue Orchard Finance , and Triodos Investment Management are demonstrating that investments across water, economic opportunity, micro-insurance, food, and agriculture—with sustainability and climate adaptation at the center—are where there is immense opportunity for value generation. By backing businesses focused on sustainability and addressing the needs of emerging consumers and communities worldwide, we're funding solutions that are actually solving problems and making a dent towards global issues that will only compound over time (in terms of risks and costs) and have massive implications on every industry.

Take water as an example. With half of the world's population likely to experience extreme water scarcity by 2025, and real-time developments like those in Mexico City, Spain, and Bangladesh, there's a reason companies like Starbucks, Reckitt, and Ecolab are doubling down on their investments in water. They're doing this directly from their balance sheets, alongside global companies such as ACWA Power.

Then there's SunCulture, which has received investments from early backers like Acumen, as well as Reed Hastings and Eric Schmidt. This shows that the market is actively seeking these kinds of opportunities. SunCulture's value creation is having exciting impacts on the water and food industries.

Standard Chartered recently announced a first-of-its-kind financing facility that, through its partnership with WEConnect, will fund women-led businesses across its supply chain and key markets in Asia and Africa. This is significant because 80% of the world’s women-owned small and medium enterprises are in these regions. Promoting women’s financial inclusion by closing the gender financing gap could add over $1.1 trillion to the global economy by 2030. Additionally, they are integrating nature and biodiversity into financial products and decision-making, developing innovative approaches that can generate funding for halting and reversing nature loss.

Morgan Stanley’s latest corporate sustainability report indicates that 85% of global companies see sustainability as vital for long-term value creation. Moreover, credit rating agencies are now modeling and incorporating the physical risks of climate change into their issuer assessments.

From water (including our oceans) to energy, and our food and health systems, financial markets have a crucial role to play. The visionaries of today and tomorrow understand this and are using capital in the most creative and effective ways.

This is the conversation we should be having instead of debating what acronym to use. Check out this great piece here released today by Dame Caroline Mason CBE CEO of the UK’s Esmée Fairbairn Foundation, and post by Leslie Johnston, M.Sc., CEO of the Laudes Foundation.

We don’t need to put different types of capital into separate boxes like philanthropy, impact investing, and other categories. This only limits what we can achieve. Many highly successful models started with philanthropy before becoming commercial, and this doesn’t make them any less successful.

In the venture capital world, we put billions of dollars into business models like WeWork that failed. Today, our iPhones are subsidized, and most of agriculture is heavily subsidized, especially in developed countries, including fossil fuels.

A Call for Media: Media sets the narrative. We need a conversation that inspires future business leaders, instead of being stuck in an incomplete ESG narrative. This means covering more stories on where capital is being used in its most creative and optimal use—regardless of how small or big those deals are—to educate audiences on the full range of opportunities out there that represent a portfolio approach to creating a more sustainable and equitable economy. This will inspire action and focus discussions on possibilities. We need to break from a global economy still driven by fear and the need to generate financial returns in unsustainable ways.