For better or worse, we live in a culture in which the coveted social label, “cool,” drives fickle fashion and retailing tastes, molds entertainment and media content, and sets the cultural lexicon. What’s cool generally equates to what’s relevant right now. Yet as the corporate sustainability and impact investing movement scales, a new class of firms, innovators and investors are redefining coolness as the pursuit of a positive societal impact. Coolness is the conviction that this societal purpose or mission does not have to be inconsistent with seeking profits and competitive financial returns in the long run. Yes, the new arbiters of cool are well-informed, well-meaning, analytical people out to sustain the world and create wealth along the way.
Consider recent headlines, which tease pivotal questions about global business sectors ranging from healthcare and industrials, to technology and consumer goods: “IBM Moves Into Health With Gel That Zaps Hospital Superbugs” (Financial Times). “Has Apple Lost it’s Cool to Samsung?” (Wall Street Journal). “Print Me a Stradivarius” (The Economist). “Real Glass that Bends Without Breaking? Mollusk Shell holds the Key” (LA Times). “Can Mushrooms replace Plastic?” (The Guardian.)
Smart companies and investors are getting behind this two-fold mission of simultaneously driving corporate profitability and a simultaneous return on human capital and natural capital. Investors who tirelessly search for companies enjoying that equilibrium are amassing wider influence in labeling “cool” for entire markets.
On their side: A bevy of evidence that long-term corporate excellence drives long-term share price outperformance in the stock market. Their formula involves systematically analyzing environmental, social, and governance (ESG) factors in their research methodologies. In an effort to enhance their analytical processes and search for better risk adjusted returns, these investors reject the old school notion that there must be a trade-off between long-term corporate profitability and an effort to address today’s massive societal imperatives. These investors, like Bruno Bertocci of UBS Asset Management, Joyce Haboucha of Rockefeller & Co., David Blood of Generation Investment Management, Joe Keefe of PaxWorld, and Cheryl Smith of Trillium Asset Management are seriously cool.
Further, on the subject of “cool”, we consider corporate executives who consistently and proudly articulate their company’s innovations in both processes and products. We look for those leaders who instill in their companies a culture of trust, innovation, collaboration, transparency and accountability from the top to the bottom. Sustainable and impact investors are constantly seeking to learn more about companies like Novartis which talk about the work to be done in vaccines to harness the power of the human immune system; companies like AP Moeller Maersk and Dow Chemical which try to find billions in fuel efficiencies by leveraging their expertise in logistics or operations management; companies like Lockheed Martin which possess the technology to filter water to a billionth of a millimeter; and companies like Qualcomm which offer “boot camp” to engage 8 year old girls who seek to become leaders in science, technology, engineering and math. These companies aspire to be recognized by the “Arbiters of Cool.”
Each time there is a headline that relates to a story of innovation, we need to consider which investors are most sensitized to corporate excellence (a/k/a corporate sustainability). Each time there is an article addressing issues such as the insatiable global demand for broadband communications and digital mobility, threats to humanity from antibiotic resistant bacteria, resource efficiency and sustainable manufacturing and consumption, we can count on the efforts of the “Arbiters of Cool” to look for opportunities in the capital markets.
We can count on the “Arbiters of Cool” to support private sector investments to drive product innovation, to attack vast new market opportunities, and to better side-step the risks of ignoring societal challenges including resource scarcity, lax corporate governance, healthcare, education, climate volatility, and essential infrastructure. The New Yorker Magazine, which some might argue is another proxy for cool, has stated that “cool can only be observed by those who are themselves cool.” If this is indeed the case, and if what is deemed “cool” is often adopted by the masses, then systematic ESG analysis is indeed about to move into the mainstream of all of today’s investment processes.