Posted on 21 September, 2020
Mukul Gulati, Managing Partner,
Zephyr Peacock writes for Economic Times on stakeholder capitalism,
sustainability, and impact investing.
Click here to read the full article on ‘Economic Times’
Below is an excerpt from the
post which first appeared on Economic Times on 21 September 2020:
"Gradually… then
suddenly" is Ernest Hemingway's famous response to the question "How
did you go bankrupt?” 'Gradually… then suddenly' also describes the rapid
adoption of stakeholder capitalism, sustainability, and impact investing by the
world's largest investors and corporations. Climate change, persistent inequality,
and COVID-19 have contributed to the increasing awareness of the private
sector's responsibility to the broader community of stakeholders.
In August 2019, 181 CEOs of the
largest corporations in the United States announced their commitment to
explicitly move beyond shareholder primacy and commit to serving key
stakeholders, including customers, employees, suppliers, and local communities.
Amongst the signatories were Larry Fink, the CEO of Blackrock, the largest
asset manager globally, and Jamie Dimon, the Chairman of JP Morgan, the largest
bank in the United States.
Why the sudden embrace of these
squishy ideas by such hardened capitalists? This movement didn't happen
overnight. A gradual movement toward Environment, Social, and Corporate
Governance (ESG) driven investing has been stirring for more than a decade.
Businesses are noticing the impact of climate change and political convulsions
resulting from the lack of economic opportunity experienced by large society
sections. Low-income communities have endured the economic devastation caused
by Covid-19.
In India and other emerging
economies, federal and local governments have limited fiscal space and
administrative capacity to address low-income populations' economic challenges.
The private sector has a critical role to play in addressing the needs of
underserved communities. Companies need to deliver both products and jobs for
low-income populations. While the private sector alone cannot solve all of
India's problems, businesses have to take the lead in formal job creation,
'inclusion,' and food security in the absence of state capacity.
Click here to read the full article on ‘Economic Times’
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