Panarchy Partners – Fund Management Singapore

Are We Ready To Evolve as Investors

The Latin word “Investire” gave us the transitive verb “Invest” in 1605. Invest we did… investors we became, in the Dutch and British East India companies. The first listed stocks commonly traded.

Then the world’s population was 600mn and focus on financial returns helped build the middle class, upgrading human and social capital, without exacting an unbearable tax on the environment. However, now almost 415 years later, world’s population is 7.2bn headed to 9bn. “Invest” for financial returns can only be achieved if we truly understand how all forms of capital work together to deliver sustainable returns for all. Our wealth will only increase if we evolve our analysis beyond financials.

Our humble and different take on History of Wealth Creation vs Sustainability can be seen in the accompanying diagram. From “a few” towards “the many”, investing and wealth creation has gone through phases where focus and respect for different forms of capital has varied. From the days of the first Billionaire female Pharaoh of Egypt, Hatshepsut till the signing of Magna Carta 1215, wealth was created only for emperors, kings and conqurerors. Magna Carta opened the doors for the elites both on land and on the seas (through trade) to gain wealth with some flow on to their subjects. During these phases social contracts with the masses while still repressive, were seeing improvements and the environment was not yet challenged. Industrial revolution in 18th century brought with it wealth for the masses, uplift in social conditions but also the start of environmental degredation as global population approached 1b billion and fossil fuels powered economic growth. This leads us to the last phase before NOW. Since 1900, the democratisation of wealth through capital markets plus invention of an accounting entry called “GDP growth” as a measure of economic strength, all other forms of capital have been sidelined or ignored. This is leading to the situation we are in now.

Now, we need to analyse returns on human capital of a firm, social costs and benefits around their license to operate, environmental impact on the their operations and bec of their operations. We need to look for returns on all forms of capital. As “Investors”we need to evolve… Investing for $ wealth and based on $ benchmarks alone is no longer sustainable. With financial assets 3.5x global GDP, a new Paradigm of investing and defining wealth is needed. One that respects and requires returns on Human, Social, Environmental Capital, along with Financial Capital and not at their expense.

Sustainable Investing has been around since the 1970s. Its evolution…..

Version 1 – CSR/SRI

Version 2 – ESG

Version 3 – Panvesting

Panvesting is the natural and required evolution of investing.