Former U.S. Vice President Al Gore — a continuous warrior for the environment — said yesterday in an interview that current investment in the oil and gas industry is not that dissimilar to the subprime mortgage crisis. Moreover, he believes that the industry could collapse within the decade. Gore’s statement came in conjunction with a five point plan from Generation Investment Management LLP (the investment group Gore helped found with a former Goldman Sachs Group executive) entitled “A Manifesto for Sustainable Capitalism”. The plan outlines a long road forward for the investing world that if adopted could fundamentally change the current environment. Aside from moving investors away from carbon intensive stocks, the five point plan lays out a world where investors are rewarded for sticking with companies for the long haul. This plan will not only reduce the stress of achieving gains in the short term, but will allow companies to focus their plans on more sustainable gains over the long term.
“The value of the subprime mortgages was based on a false assumption,” Gore said yesterday in an interview. “In almost exactly the same way, the value of all of these carbon fuel reserves is based on a similarly absurd assumption.”
Gore’s statement comes on the heels of a letter written to the Bank of England from a group of influential investors and officials in the United Kingdom asking the bank to reduce its dependency on carbon heavy investments for the long term good of the country and the world markets.
“These subprime carbon assets have an asserted value based on the assumption that it’s perfectly OK to put 90 million tons of global warming pollution into the atmosphere every 24 hours,” he said. “Actually it’s not.”
Generation Investment Managers has set out to prove that their style of investing — thinking about investments holistically not just financially — is superior. They know their sustainable mindset helps choose companies that have their sites set on the future and therefore future growth, rather than companies stuck in todays market that have no backup plan for when the wells run dry — and as we know, they certainly will run dry.
Gore and his co-founder David Blood start their manifesto by quoting General Omar Bradley on his thoughts for how America should reshape democracy abroad in the wake of WWII, “It is time to steer by the stars, and not by the lights of each passing ship.” The manifesto is as much for the investor as it is for the companies being invested in and the broader market. Gore and Blood say companies should create sustainable products to prepare for the future market, cut waste to save costs, and better manage risk to avoid penalties.They also urge the market to move toward “integrated reporting” that would allow companies to integrate their communications organically into their buisness and end the issuing of quarterly earnings reports that cause companies to work in quarterly sprints instead of a long stride. They also urge companies to incentivize workers toward long-term goals instead of rewarding short-term gains, and also to promote long-term investing instead of short-term trading.
The pair close their manifesto with a plea much like General Omar Bradley’s, “Today we have an opportunity to steer by the stars and once again rebuild for the long-term. Sustainable capitalism will create opportunities and rewards, but it will also mean challenging the pernicious orthodoxy of short-termism. As we face an inflection point in the global economy and the global environment, the imperative for change has never been greater.”
Via Bloomberg News
Second photo by Silveiraneto on Flickr
Third photo by http://www.flickr.com/photos/epicharmus/1613548865/sizes/l/in/photostream/”>Epicharmus on Flickr