What is your return on investment if you invest sustainably? Reto Ringger #circumcenter

What is your return on investment if you invest sustainably?

You know financial markets are so short-term well we need to think long term if that would change everything would change hi there welcome to the circumcenter a series of stimulating dialogues on the circular economy today’s topic is finance and investment the channel funds into sustainable initiatives and startups according to research investments in environmental

Social and governance areas increased by almost 74 percent from 2016 to 2020. chatham house estimates that more than 1.3 billion dollars is invested in the circular economy annually however this is still a tiny number compared to the larger linear economy sustainable investment has been a passion for someone long before it was a topic for most businesses and

Investors meat rito ringer he founded the first sustainability index which later became dow jones sustainability index and the world’s first sustainable asset management company rito is the ceo of globalance a swiss private bank through its globalance footprint it becomes the first bank in the world to show its clients the impact of their investments on the economy

Society and the environments let’s hear it from rito about the role of financial markets in sustainable development and in the systemic change we seek hi rito welcome to the circumcenter let me begin with our first circle which will focus on your personal life so my first question is when you think about your past what was the most important event in your life that

Made you who you are today i think that was when i became an entrepreneur it took me 26 years until i i really knew what i would like to do out of my life and i was always searching and i did not really found something that attracted me and then i wrote a business plan for a company uh called sustainable asset management because i wanted to combine sustainability

With asset management was lucky to find investors that was back in the mid of 90s and then we were looking for offices and then i was sitting on that desk uh first day and really could start you know your your dream and your vision and i think that’s when i realized hey that’s that’s what i want what is this story which led you towards sustainable investments i

Have an economics degree from from my university background and i was working for banks i was working at the stock exchange and the stocks exchange really fascinated me the trading the fast development the prices the dynamics of the markets and on the other side i always was interested in nature in holistic thinking in kubernetes thinking i wanted to combine that

But the banks i worked for they you know they did not care about this you know it was so clear for me that this has to come together because i mean this whole sustainability environmental and and climate thing was in in my assessment i mean you already had the the world business council of development that had the conference in 92 so it was really on the radar if

You had an open eye and an open ear and and i said i thought of it as a big big business opportunity and it was my passion to combine this this let’s say nature i came more from the e from the esg from the environmental side uh and also intellectually it really inspired me to find solutions and to convince people uh to invest sustainably can you tell us about

The idea behind dow jones sustainability index yeah that’s really interesting that uh you know in in 1997 we could convince dow jones to do with us the sustainability index and you have to imagine i mean dow jones is the owner of the wall street journal that’s the most capitalistic a newspaper and they do a sustainability index 30 years ago i mean that was really

Pioneering you know the trigger was that we had a problem and the problem was that the markets did not believe in sustainability investing i mean our objective was really to convince the financial markets right so to convince investors and they ignored it a bit at the very beginning because it was it was not in their turf and it was too early and then so on but

What happened is that the corporates they wake they woke up because they were measured uh against sustainability so mcdonald’s general electric abb all those companies suddenly were managed uh were measured and we gave them rankings and on the logo there was also dow jones so they took it very very serious so i think we we influenced them and we triggered the

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Process that they started to building up because they were looking where are our peers uh and from that sense it had impact and then today you still uh 30 years later if if a company is number one the dow jones sustainability index they make a press release and they announce it and they’re proud and then some companies really also aligns their payment structures

Their performance uh you know compensation for top management to the membership of the index so that was a side effect that we did not expect to to develop out of it now we’re moving into the second circle of our conversation which will focus on the finance sector and your business my first question is what is globalance footprints well we want to convey to the

Investment world and to our customers that they have an impact with their investments many many people are not aware that they are influencing the world with their investments and so they have a footprint so the footprint methodology works that the higher the number is the the better your footprint is because we want to create positive change and the footprint is

Being measured what is your impact on three dimensions so what is your impact on the environment on society and what is your impact on the economy so we came up with criteria for every one of those three sectors and then we have clear criterias how we measure that and that’s you know how we come to the let’s say to this coordinate how does globalance world map hope

Investors make conscious decisions i mean this world map we created really to visualize the impact right and we work together with the design company and they told us that you have to read the date about yourself to feel the data and then we had the idea of creating this globe because everybody is using google maps and they know they’re used to it and then and it’s

Very emotional right so you have places where you have been where you would like to see oh what’s my impact there and so on so that must be basic idea behind it and then we filled it up with data and i mean it was really a very fascinating intellectual uh talk to do that and then it was very interesting to see the reaction of the market like with the dow jones

Index it seems that we have an impact because what happens now is let’s say i give you an example there’s a big pension fund here in switzerland and they have uploaded their portfolio in the tool and saw that they have a climate degree which is way beyond what they expected and what did they do they went to their banks and told them look i mean this is not what

We want you have to improve get better so i mean this tool is really having an impact also on a wider scale and i think that’s that’s really great how do you convince investors to consider long-term impact over short-term profits yeah that’s the mother of all questions right because at the end you know we as human beings we are we are short-term but on the other

Side 52 of our custom base is female this is really a high number for a bank right so it seems that you know female investors are more open to that you know maybe we’re more interesting for younger people that you know have children that are looking for the next generation so i think we’re in the midst of of of a change of values also uh i’m not saying people are

Becoming long-term but but it’s changing and if we can demonstrate that you can also deliver return financial return with that concept i think that’s the best uh you know proof we can we can do that people understand you know this is also from a financial perspective this is the right thing to do how do you define impact in sustainable investments i mean there’s

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A bit of confusion uh in in the market about sustainable investments and and if i do presentations i always use a concept from psychology to describe the market and this concept describes uh that you have to go through four rooms if you have to solve a problem so it’s called the four rooms of change for the first room is the room of happiness so you just fell in

Love everything is great no problems uh just uh perfect right and then your friend comes to you your your wife your husband tells you um you know things are not going too well we should change a couple of things i’m not so happy anymore and then you are in the room of denial okay and then you do not change things in the room of denial because you deny the problem

Your friend has left you because now you you really face the problem and you cannot deny anymore and now you’re in the room of confusion and in in that room of confusion you have to develop then the solution and that’s the fourth room that you are in the room of solution and if you look at the issue of sustainability i mean our parents have been in the room of

Happiness resources energy everything was you know cheap free and then those scientists came up and told us hey be careful right we denied we ignored and i think and there are still a couple of people in the in the room of denial today but most of the people are in the room of confusion now task is really challenging everybody has a different opinion regulator

Comes to the playing field uh politics com consumers uh technology i mean it’s really confusing uh foreign masters and and i think it will it will stay confusing for us for a couple of years i think that’s our role to really help investors find their way in in that confusing room uh help them with with understand you know what can they do in terms of sustainable

Investing because you also can be too much focused and then you give up diversification or returns it’s really a difficult task and i think that’s that’s really the job for a company that claims themselves to make sustainable investing to find solutions for investors that would like to combine investment returns but also sustainable development where do you draw

The line to avoid falling into business as usual you know i think i think to a lot of email s maybe that traditional investors still do so we don’t invest in fossil fuels so we have you know exclusions when it comes to certain sectors and so on but especially recently there there came up very new questions where we have to find answers so one one question as an

Example is whether microsoft is a producer of weapons because more and more weapons it’s not hardware it’s software and microsoft and also other it you know companies are a big supplier of services to pentagon so they’re creating weapons with that with that software right so is it now a software producer or not because on one side you don’t want to have weapons

In your portfolio and then suddenly such questions come up so you know that’s part of our daily business that we have to reflect about those those questions and sometimes we don’t have to answer it but we still have to engage with them and they i i think that’s that’s really great because it makes us better as a company also this is the end of our business circle

And now we’re moving into our third and final circle which is going to focus on your thoughts on the future my question is what do you see in the future of sustainable investments i think we’re in an interesting uh face right now i mean i’m i’m in that field uh close to 30 years but now it’s really taking off not only negative with green washing but also positive

I mean there’s a lot of money flowing into that sector uh a lot of people are being hired to do analysis to understand the topics i mean there’s a short shortage of esg analysts and esg portfolio managers and there are more regulations coming uh this is good but this is also bad on some elements because it kills a bit innovation many many smart people are now

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Entering you know this field so they’re not going any more to the hedge funds they’re going to the sustainable investing field which is a great thing so i think things are changing still you know we have to become more long-term but maybe that’s that’s then the next phase that we have to think about okay how can we you know change our pension structures to become

More long-term because we have also this demographic challenge independent of let’s say more the environmental sustainability there was a book from the world business council in 92 called financing change and that’s really the role of financial markets financing change right i think we have a huge challenge but on the other side we also have more and more people

Uh trying to work on solutions what needs to change in the finance sector to create the most significant environmental impact for the future i think it’s very simple we need to think long term if that would change everything would change i’ll give you an example some time ago we had a very large pension fund from the uk it issue a request for a proposal foreign

Investment strategy for 20 years so it was a virtual request but they went to the market and then and and was asking for investment portfolio that could be invested for 20 years right so usually when a pension fund goes out the proposal has to be for let’s say an investment horizon of three years and so we were participating in that competition uh and realized that

We had to think completely different because if whether you have a time horizon of three years or of 20 years makes a huge difference because if you only can invest for three years and then you have to be you know liquid and then you have to labor return in three years that’s limiting your your let’s say your creativity your options whereas if you have 20 years we

Came with very innovative solutions uh and a lot of them were alignment with sustainable development and so i think the answer to your question is we should think long term and then a new horizon would open up and we would find new solutions what would you first advise brands and businesses who want to transform their production towards a circular economy i think

The most important thing is to understand where do we have impact uh positive or negative with our production with our products i think to create a plan and create a vision how can we change that and maybe be a bit too ambitious to stretch your goals to inspire you know your your team and and maybe also some customers and some suppliers because you need them and

Then i think it’s really about also challenging yourself because i think what we what we need to understand is everything that we will have to do to in that solution room will be outside our comfort zone this is outside our comfort zone because we have to leave our comfort zone otherwise we will not be able to let’s say find solutions because the solutions have to

Be very different from what you know so we cannot be five percent more efficient or ten percent no way we really have to think very very differently that’s something we should be aware of and and really challenge ourselves also to find good solutions and this concludes our conversation thank you so much for sharing your story with us rito yeah thank you it was my

Pleasure thank you very much thank you for watching we hope this conversation inspired you to start your circularity journey today so please subscribe to our youtube channel and hit the bell button not to miss the future dialogues with passionate leaders in the circular economy if you enjoyed this conversation you could listen to the whole interview on spotify or

Apple podcast from the link below see you at the next circumcenter episode discovering the center of your decisions

Transcribed from video
What is your return on investment if you invest sustainably? 🟢 Reto Ringger 🟢 #circumcenter By Cross ChangeliveBroadcastDetails{isLiveNowfalsestartTimestamp2022-10-20T064516+0000endTimestamp2022-10-20T070543+0000}