ZERONAUTS: BREAKING THE SUSTAINABILITY BARRIER by John Elkington, EarthScan, London; Routledge, New York, 2012
Author John Elkington is a founder of the global movement for corporate and investor responsibility, author of seventeen books; founder of the famed consultancy SustainAbility and currently co-founder of the investment firm Volans Ventures, based in London. As a serial innovator, Elkington templates words and phrases: sustainability, and now "zeronauts," defined (p. 251) as "an inventor, innovator, entrepreneur, intraprenuer, investor, manager or educator who promotes wealth-creation while driving adverse environmental, social and economic impacts toward zero." Elkington describes "zeronauts" as people who find, investigate and develop breakthrough solutions for the growing tensions between demography, consumerist lifestyles and sustainability, as well as political leaders and policy makers who help create regulatory frameworks and incentives needed to drive one-Earth solutions to scale.
Venture investors looking for new deal flows and who see our current global crises as opportunities, take note. This book upends the traditional economic and financial formulas still governing the asset classes and investment universe of most portfolio managers, institutional investors and trustees.
Yet times are changing and the old verities: "efficient markets," "rational actors," "modern portfolio theory," capital asset-pricing models, value-at-risk models, even Black-Scholes option pricing and diversification models are suspect after the meltdowns of 2008, still reverberating in the world's real economies. So, my advice to market players: take the time to read Zeronauts for a new view of future winners and losers in finance and global business. Along with other groundbreaking books I have reviewed in 2012 from Dark Pools, Broken Markets to the Sixth Wave, Clean Tech Nation, 2052 and Money & Sustainability, Zeronauts takes a similarly wide view of our global future. Elkington sees humanity's greatest challenge as learning long-range systems thinking. I agree and particularly to correct the narrow "short-termism" that still prevails in financial markets - even after being blind-sided by the 2008 self-inflicted crises that began on Wall Street.
Yet asset managers are beset by obsolete rules and textbook formulas which keep them straitjacketed and hemmed into the single bottom line of short term benchmarks. Seeking alpha and diversifying into new "asset classes" such as food, forests, arable land and publicly funded infrastructure only raises anger among affected constituencies or leads to new bubbles in ETFs, index funds and other derivatives. Computer models at NECSI now show that speculation's role in driving up food prices is linked to hunger, malnutrition and riots. Similarly, short-term, single-bottom-line obsessions in financial markets continue to drive out retail investors and cramming down angels so vital to start-ups and technological innovation. As an early-stage private investor, I have personally experienced such losses at the hands of profit-maximizing venture capital and large investors.
Meanwhile, Elkington sees vistas of new opportunities and prosperity in aiming for zero pollution emissions, saving money with efficient use of energy and materials as we do in our Green Transition Scoreboard and Transforming Finance Based on Ethics and Biomimicry. The author identifies 50 pioneer "zeronauts" leading the charge in changing company business models, product lines, production methods and identifying new markets in changing demographics, social media, as well as companies such as Unilever, Desso, Interface, Frito Lay and those covered by Cleantech. The deal flow pipeline bringing the next generation technologies to scale will likely continue to be overlooked by asset managers still limited by theory-induced blindness imposed by orthodox financial models. As I noted in Strategy+Business ("A Walled Garden for Capital," 2009), the new games is "bypassing Wall Street" with private liquidity networks and such peer-to-peer lending as provided by Zopa, Kiva, crowdfunders and other online market-makers. The success of Mosaic in financing local community-owned solar energy projects in less than 24 hours was widely reported.
We would add all the innovative companies and deals we track daily at ethicalmarkets.com, many still publicly traded, as well as issues of "green" bonds and other new public-private financing models. All these innovations point the way to the low-carbon, cleaner, knowledge-rich green economy Elkington describes in Zeronauts and endorsed by 191 nations at the UN Rio+20 summit in July 2012. He describes how these opportunities are revealed by more accurate metrics: at the corporate level in ESG, "triple bottom line" accounting and mirrored at the national level by the new scorecards of progress. We also track these broader metrics at beyond GDP and the public's acceptance in our surveys in eleven key countries with Globescan. Examples include: the Canadian Index of Wellbeing (CIW), the UN's Human Development Index (HDI), the OECD's Better Life Index and our own Ethical Markets Quality of Life Indicators.
The key in all these new metrics, as Elkington also pointed out, is zeroing out "externalities" as I have stressed for decades ("Time to Internalize Those Externalities," GreenBiz.com). Once all these social and environmental costs are internalized on financial statements and company balance sheets, then at last prices can be corrected and financial advisors and asset managers can move toward more accurate accounting and asset pricing. This book will help asset managers and institutional investor trustees see new vistas for future success and global green prosperity.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.