Investing in the 22nd Century

An Open Letter to the British Investment Community

Dear Professional Investors,

We are confused…

How can the Investment community cut through the clutter, the babble of voices providing a blancmange of imagined guidance, but only succeeding in creating confusion? ESG, Sustainability, Impact, Cleantech, Climatetech, SDG’s, they all appear to lay down guidelines, but require explaining, categorising, reconciling with one another, and even contradict one another, so they end up confusing us at best, and meaning very little at worst.  No wonder accusations of “greenwashing” abound, when there is so little clarity surrounding the terms we use.  Now we are finding the media and commentators actually briefing against them, and headlines like “ESG market may be in for some rough sledding” (Bloomberg Green Daily, 30th March 2023) are increasingly appearing.  (Try “ESG doing badly” on Google.  You will see what I mean.)

The origins of our confusion

This is a repeated mistake, from the origination of the theory of Sustainable Development in 1988 onwards. Fine-sounding sentiments, which were adopted by the Rio Earth Summit in 1992 with universal approval, but very little was done in consequence. Almost no-one understood what “Sustainable Development” actually meant. “Local Agenda 21” was supposed to tell us what to do, but it told us to do what we wanted, under 21 different headings, without providing explanations, illustrations or guidance, and so we ended up doing little as a result (other than starting to recycle – a good thing). These are the origins of what stands as perhaps the single most damning indictment of ourselves. We failed to act when we could have done. The problems causing, and caused by, Climate Change that were identified in 1980, when Al Gore first held hearings to explore what could be done about them, remained unaddressed. In consequence, the problems did not remain in a steady state, they got worse and worse over the coming decades, until we reach the present day, when they are still getting worse.

ESG, Sustainability, Impact, Cleantech, Climatetech, SDG’s, they all appear to lay down guidelines, but require explaining, categorising, reconciling with one another, and even contradict one another… No wonder accusations of “greenwashing” abound, when there is so little clarity surrounding the terms we use.

Are we to blame?

How much more damning, then, that we perpetuate the very mistake that was in part a cause of the problems in the first place?  Confusing ourselves with impenetrable language, a spaghetti of acronyms that obscure and obliterate the true nature of the problem, cause prevarication and equivocation, and still prevent decisive corrective action from being taken.  This is a mistake which is now, and was then, entirely avoidable, yet here we are doing it all over again.

Language is given to us to communicate a shared reality.  In using language to define that shared reality, we can share a common understanding of the problems we face, and in defining the problems we face with precision and clarity, we can work together to solve them.  But this process is entirely defeated if language is used to hide from any clear understanding of the problem.  ESG is doing today what Sustainable Development did in the 90’s.  It is confusing us and leading us to argue amongst ourselves.

Perpetuating the mistake

I went to a big conference recently in a grand hotel on Grosvenor Square which was very well attended by the Investment community, the subject of which was ESG itself.  The entire conference was devoted to trying to explain ESG, define its categories, understand its metrics, and develop frameworks for measurement.  Needless to say, it was complicated, labyrinthine, sometimes hard to understand, and, in the end, entirely inconclusive.

“Fiddling while Rome burns” takes on a whole new meaning in the context of modern day climate change. This, quite literally, is what the conference in Grosvenor Square was doing.

Source: Greenomy’s Glossary: Navigating Key Taxonomy and ESG Acronyms

See a recording of my full talk.  

Our status must be acknowledged

It is not good enough.  We, the Investment community, have enormous influence over the world we inhabit and the direction it takes.  My organisation, which originated as Green Angel Syndicate and is evolving into Green Angel Ventures with the launch of our first Venture Fund, has just passed the £30 million mark for the total sums invested in start-up and early stage companies.

I mention this in passing, quite casually, because I know this is not considered to be much money in the investment world.  It is not even considered to be very much money in the world of angel investment in start-up companies.

All of us, me writing, you reading and nodding your heads, are living in cloud-cuckoo land.  When did we leave the real world and start thinking that £30 million is not a lot of money?  It is a vast amount of money.  Which of us has ever actually seen £30 million pounds?  If we had any of the Brinks Mat robbers in our number, maybe we would have done.  But I doubt whether any of them are reading this.

Time to take responsibility for our decisions

All of us are dealing with sums of money, the influence of which in the real world is greater than any but the most exceptional people ever exercise over the world we inhabit.  We are a minute number of people, an elite, with the power to influence entirely disproportionate to our number.  We are hugely influential in determining outcomes in business activity, and how they impact the real world.  Green Angel Syndicate’s £30 million does more than any one of us could ever do alone.  The investment community is helping to form the world we inhabit, the reality that all of us face, and it always has done.

The Investment community has always tended (or intended) to use this responsibility within the strict guidelines of a well-regulated industry, to make a profit for our investors without many scruples concerning sectors.  Companies making and selling weapons, cigarettes, oil & gas have been as acceptable as companies making clothes, cars and cakes. There has always been a degree of latitude and a degree of risk, but overall, one Fund Manager can be lined up with another in the knowledge that they subscribe to the same pattern of thought, a framework that you can see in stock market industry categories which assume steady state, stable economic growth.

We are a minute number of people, an elite, with the power to influence entirely disproportionate to our number.  We are hugely influential in determining outcomes in business activity, and how they impact the real world.  Green Angel Syndicate’s £30 million does more than any one of us could ever do alone.

New times call for new measures

We are now working in another economic dimension, which introduces an element of danger for our world, our families, and ourselves.  Our power to do harm or good as a result of our investment decisions has changed because our world has changed.  The steady state no longer exists.  Our responsibility now demands that we take a different approach to investment decisions with a different degree of care.

We need a new framework because the conditions characterising the world we inhabit are new.  Our world has never faced challenges similar to the ones we face today.

How we will be judged

We need a different start-point now.  I will suggest the start-point that I use in making our investment decisions: what difference will it make to the 22nd century?  I like to think of the babies many today under the age of 40 will be producing, and how these babies will look back in their 70’s on what we are doing now.  As they approach the 22nd Century, will they think we made the right decisions, and set the world on a safe course for the benefit of their futures?  Or will they blame us and ask: “why didn’t they stop doing the damage when they could?”

Invest for the 22nd Century

This is the new mantra I propose: invest for the 22nd Century.  Of course, it is axiomatic that we are investing to make money.  But the businesses being started now that have a lasting influence on the 22nd Century will make money.  They certainly will not fail.  Equally obvious, it is axiomatic that we are all investing for a return that we will see in our own lifetimes, long before the start of the 22nd Century.  But that’s also no problem, as the businesses that succeed will yield the returns we seek as they scale, beyond which they will continue to grow with or without our investment.

So now, how do we invest for the 22nd Century?  Once again, I want to introduce you to a completely different concept from mainstream thinking covering climate-related investment right now.  Reality.  Invest using your own understanding and analysis of reality.

How do we do it?

I suggest that you look around you.  Today you are surrounded by products, objects, services that make you comfortable and the existence of which you take for granted.  Heat, light, your clothing, your personal accessories, your electronic equipment, the carpets and decorations in the room, the tables and chairs you sit at.  Ask: how have these been produced?  Do they do any harm to the world I inhabit, do they do good, or are they purely neutral?

These sound like questions for our personal lives, but I am not talking about our personal lives.  I am talking about our working lives.  I want all of us, in the same way, to ask ourselves these questions before we make another investment decision.  They are sometimes difficult questions, but not only is this our work – we are being paid to do it – but also our impact is enormously greater in our jobs than in the vast majority of other working roles in the economy.  Difficulties are there to be overcome using our professional capabilities.

Difficulties are especially there to be overcome when the alternative is denying our children or grandchildren the safety and security in their lives that we have enjoyed, or even denying them the possibility of life at all by the time we reach 2100.  We have to confront the fragility of the world we now inhabit, and make sure that our professional choices do not help to break it.  This is reality.

We are already working to this framework.  We have already set up the only angel syndicate in the UK specialising in the fight against climate change.  Today, it has a portfolio of 35 companies, not one of which has gone bust, but crucially, all of which have exactly the relationship to the 22nd Century that we demand.  These are technology innovations that will materially affect the world in 2100 for the better.

All are welcome to join us in the work we are doing, either by joining the syndicate itself if you are a high net worth individual with an appetite for angel investments, or by becoming an LP in the new £100 million venture fund we are establishing right now, for professional investors.  In either case, by aligning yourself with our work as LP or as Member, you will become part of the most direct, specialist approach to climate change available today in the UK, and contribute to the solutions we are adopting to combat the fragility we are all facing.

Let’s all work together to answer only one question: how will it look in the 22nd century as a result of what we all do now?  If we all now set out to invest for the 22nd Century, we stand a chance of making those investments which will have the best outcome in the fight to stop climate change from stopping us.

Let us all commit to stopping the harm being done, repairing the damage already done, and showing future generations that we took responsibility when it mattered. 

Good luck to all of us!

Nick Lyth

President and Founder, Green Angel Ventures

April 2023