Posted on 21 September, 2020
Mukul Gulati, Managing Partner, Zephyr Peacock writes for Economic Times on stakeholder capitalism, sustainability, and impact investing.
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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Since its inception in 1994, Zephyr has sponsored and/or managed 26 investment funds in both public and private securities markets representing approximately $1.2 billion in combined commitments and assets under management
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