I often discuss with entrepreneurs about the prospective evolution of money, encompassing concepts like decentralized currencies and cryptocurrencies, etc. However, entrepreneurs frequently overlook a pivotal aspect: the strategic deployment of existing money within the market. In other words, we talk about WHAT would be the future money but not about HOW money works now.
Underpinning this discourse is the recognition that conscious leadership involves not only understanding how to accumulate wealth but also how to conscientiously channel and amplify it to achieve a common purpose. In what I term “Coronalism” or “Capitalism 2.0” in this blog, we unveil a paradigm shift, wherein money assumes an additional role beyond its conventional functions of storing value, serving as a medium of exchange, acting as a unit of account, and facilitating deferred payments. In this emerging economic landscape, money emerges as a potent economic instrument for executing global policies. It becomes a tool for entrepreneurs and leaders to drive intentional, positive change on a global scale. It becomes conscious money.
Climate change and the importance of achieving sustainability excellence have become recurrent topics in the corporate sphere. Conversations often revolve around the United Nations Sustainable Development Goals (UN SDGs), with over 12,000 companies participating in the UN Global Compact. A few years before the Global compact was launched, the Global Reporting Initiative (GRI) was introduced, attracting the commitment of over 10,000 companies. Undeniably, sustainability has become a cornerstone in today’s business lexicon.
This is not a hastily embraced trend which will fade away. The trajectory of this process reflects a deeper, more enduring transformation. To appreciate the roots of Environmental, Social, and Governance (ESG) criteria, one must journey back to the early 1900s. Visionary leaders of that era foresaw the potential for the market to play a pivotal role in addressing societal challenges. This foresight sowed the seeds of perceiving money not merely as a transactional medium but as a potent economic tool capable of shaping meaningful progress.
The starting point of ethical investment practices can be traced back to the practice of “negative screening” by religious groups, where certain corporations were excluded from investment portfolios based on their involvement in activities like tobacco or alcohol production. However, the trajectory of this evolution has been far from linear.
While the 1970s and 1980s brought heightened awareness of environmental issues, this period also saw divergent perspectives. Notably, the influential economist Milton Friedman emerged as a leading voice advocating for a hands-off approach by the market towards such matters. At the forefront of the “make money now” movement, Friedman’s ideology left an indelible mark on an entire generation of slick executives. Central to his philosophy was the assertion that a company’s sole responsibility lay in maximizing returns for its shareholders. This perspective, championed during those decades, underscored a narrow focus on profit-oriented objectives. Only shareholder value matter for them during those days.
In the contemporary landscape, we have transcended the limitations of those oversimplifications. In direct contrast to the “make money now” ethos of the 1980s, I advocate for the concept of “conscious money.” Astonishingly, there are still young entrepreneurs who remain stuck to the line of thought prevalent in that era. When interacting with them, I often find it necessary to make them aware of various economic and legal realities that have evolved since the 80s, shedding light on aspects of which they may not be fully cognizant and hoping to awake in them a more conscious management approach.
I typically start by explaining the various initiatives, frameworks, and regulations that have surfaced to address critical factors and champion sustainable and responsible business practices. Below, I outline some key milestones of the ESG evolution, namely the Principles for Responsible Investment (PRI), Sustainable Development Frameworks and Reporting (SDFR), and the EU Taxonomy Regulation:
Principles for Responsible Investment (PRI):
Initiated by the United Nations in 2006, the PRI constitutes a voluntary set of principles designed to prompt institutional investors to integrate Environmental, Social, and Governance (ESG) factors into their decision-making processes related to investments.
Signatories to the PRI pledge their commitment to incorporating ESG considerations within their investment practices. Moreover, they engage with companies to foster responsible business behaviour. The PRI boasts a global network with over 4,000 signatories, representing a substantial asset management portfolio exceeding $100 trillion.
Sustainable Development Goals (SDGs):
The United Nations has delineated 17 SDGs, a comprehensive framework aimed at addressing global challenges such as poverty, inequality, climate change, environmental degradation, and fostering peace and justice. Numerous companies and investors align their sustainability initiatives with these SDGs, recognizing their role in contributing to broader global objectives.
Sustainable Development Frameworks and Reporting (SDFR):
The Sustainable Development Frameworks and Reporting (SDFR) encompass a set of structures and mechanisms designed to guide and assess sustainable development initiatives. Central to this framework is the alignment of corporate activities and reporting with the United Nations’ 17 Sustainable Development Goals (SDGs). Companies and investors often utilize the SDFR to strategically integrate sustainability efforts, ensuring their contributions are in harmony with global objectives outlined by the SDGs. This framework serves as a tool for organizations to articulate, measure, and communicate their commitment to sustainable development, fostering transparency and accountability in their business practices.
Taxonomy Regulation:
In the European Union (EU), the Taxonomy Regulation is a strategic initiative focused on establishing a comprehensive classification system, or taxonomy, for economically sustainable activities with a particular emphasis on environmental considerations. This regulatory framework outlines specific criteria for evaluating the environmental sustainability of economic activities, aiming to prevent greenwashing practices. The overarching goal is to foster investments that genuinely contribute to environmental objectives while ensuring transparency and credibility in the financial markets.
This is HOW money works now. It is conscious money!
