News and Insights

Holistic thinking. More important than ever.

Burkhard Varnholt reflects on the framework conditions for ESG investments and the aims of the UN’s Agenda 2030.

When speaking with business associates or among friends, I often hear: “Well, you can’t have everything,” a phrase about which I am of two minds. On the one hand, a policy of renunciation can certainly have its merits. A sharing-economy model contributes to conserving resources and simplifies life. On the other hand, the message carries with it a note of resignation. When you say “You can’t have everything”, you forgo from the outset an optimal solution that might satisfy the various needs of different stakeholders.

Should investors want to have everything? The answer is a resounding “yes”. Investors should not focus exclusively on the economic upside of an investment but also incorporate ESG (environmental, social, governance) criteria. So the natural follow-up question is: Has homo economicus been rendered obsolete? The distinguishing characteristics of this type of individual, familiar to us from textbook economics, are his desire to maximize profits and the rational subordination of his decisions to achieving this objective.

Bottom line, homo economicus is here to stay – for the simple reason that, without decent returns and long-term value appreciation, our economic and social system is doomed to collapse. He must, however, broaden his horizon. Goal-setting is becoming more complex, more demanding – and more exciting.

Long ESG tradition at Credit Suisse

The commendable trend of investing according to ESG criteria is actually nothing new. Holistic thinking is an everlasting virtue, and the history of Credit Suisse is a particularly illustrative case in point. Already in his day, Alfred Escher was motivated by the idea of putting Switzerland on the road to progress and prosperity on multiple levels. He founded the Federal Polytechnic (now ETH) in 1854 and “Schweizerische Kreditanstalt” (forerunner of today’s Credit Suisse) in 1856. Then in the 1870s he became the driving force behind the construction of the Gotthard Tunnel
– the world’s longest railway tunnel of his day.

The entrepreneurial initiatives of this pioneer cum patron helped to foster research, create jobs, and generate greater tax revenues, all contributing to the prosperity of the Swiss people. The effects of Escher’s deeds and actions proved sustainable then and continue to do so to this day. They demonstrate in exemplary fashion that sustainable thinking is always long-term oriented – even if, conversely, long-term thinking is not necessarily always sustainable.

Another example of Credit Suisse’s commitment to ESG values is its signing of the United Nations’ six Principles for Responsible Investment (PRI) in 2005, making Credit Suisse one of its first signatories. A voluntary framework initiated by investors, the PRI assists in developing a better understanding of the importance of sustainability, all the while integrating ESG criteria into investment decisions.

Strong arguments in favor of ESG investing

First, the momentum and broad appeal of ESG-related characteristics make a strong case for ESG investing. Moreover, they are reflected in all five of Credit Suisse’s Supertrends – from millennials’ new world of values and the needs of the silver economy to disenchanted societies in a multipolar world through to the opportunities offered by digitalization and the need for infrastructure investment.

Still, there are 7.6 billion other reasons to align investment decisions with the ESG framework – in point of fact, the world population is currently estimated at 7.6 billion, with some 230 000 new people added each day. And this on a planet that is not prepared for population sizes of this order of magnitude, a planet that – absent a solid, workable plan of action – is heading toward (further) regional disasters.

Alfred Escher’s entrepreneurial initiatives show that sustainable thinking is always long-term oriented.

One such blueprint for action is Agenda 2030 for Sustainable Development adopted by the United Nations General Assembly in September 2015. The eradication of poverty and the fight against social inequalities are highlighted as the most formidable challenges and are targeted by the 17 Sustainable Development Goals (SDGs) at the heart of Agenda 2030 (see “The UN Sustainable Development Goals” on page 15).

Agenda 2030 is rightly based on the principle that SDGs can be achieved only in cooperation with the private sector. Private sector activities, investment and innovation are termed as “key engines of productivity, inclusive economic growth and job creation.” According to Swiss economic umbrella organization economie-suisse, the SDGs are squarely in line with the self-interest of the economy: “Wherever poverty diminishes and legal security increases, markets grow. This results in prosperity and peace by means of trade and investment.”