MarkAn intelligent investor always has a portfolio of assets to mitigate risk and ensure regular returns.
Some assets yield rents or annuities, some are held without a return until sold for equity gain, some are actively traded, and then there is a cash reserve.
But this is just the start.
A diverse portfolio is not enough to secure against investment risk. Wise investors have to pay attention, make decisions and keep their eye on the markets. This can be hard yards so many let the experts do the heavy lifting and put their hard-earned money into mutual or superannuation funds.
This leaves the impression that investing is a hands-off process. A set and forget approach. In reality, some assets can be acquired and left to mature, while others need regular care and attention.
Sustainability is a bit like an investment portfolio.
There are many options, and all are required in order to achieve solid returns. Some can be ‘set and forget’ like solar panels on the roof, but others need near-constant maintenance. Timed grazing, for example.
But like any intelligent investment, sustainability needs action.
Sustainability portfolios
Most individual sustainability portfolios are patchy at best.
Even a casual glance at what the average person does daily confirms our lack of sustainability.
The original Bruntland Commission definition of ecologically sustainable development sets the tone
‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’
In other words, get on with using nature, only pretend that has no effect on it. A similar theme appears in definitions of sustainability from academic and popular literature.
avoidance of the depletion of natural resources in order to maintain an ecological balance
the quality of causing little or no damage to the environment and therefore able to continue for a long time
Then there is the original definition of the noun sustainability
the quality of being able to continue over a period of time
Essentially, it will keep going ‘for a period of time’.
The problem is that humans are leveraging natural capital for personal and collective benefit without maintaining that capital. We are mining it in almost every situation ably supported by an army of fossil fuel helpers. This vast energy and nutrient subsidies kick the consequences of depletion further down the road.
As the consequences of depletion are denied and, so far, humanity has got bigger and mostly better than at any time in history, there is an impression of sustainability.
We pretend that a portfolio of sustainability actions is enough to make it real.
Fresh water is precious and cannot be taken for granted.
An alternative definition of sustainability
I just find it curious that the idea of sustainability has become fashionable rather than a requirement. It’s a bit like an expensive handbag. It kind of does a job but is way overpriced.
I think it’s time to change that and take sustainability more seriously.
We can start by learning that sustainability is not about keeping everything the same. It requires active management of natural capital to produce into the future.
Keeping things the same is not possible given the exponential global changes in resource use. Anyone with half an eye on the world will have seen the change that has occurred since the industrial revolution and how it accelerated. The world looks different now from what it did a hundred years ago and it will look different again in another hundred years.
In pure biophysical terms, humanity can mine away with impunity. Planet Gaia couldn’t care less because she will be here until the sun expands to swallow her up, several billion years hence. Resource use with impunity is a big deal for humanity because if we continue to operate unsustainably, our resources will run out sooner rather than later.
So here is an alternative definition of sustainability
active management of natural capital portfolio for resilience and multiple returns
sustainably FED
What sustainably FED suggests…
There is no choice for humanity but to live off natural capital.
Living off the land is precisely what humans did for millennia. The difference today is that there are many more mouths to feed than just 200 years ago. We invested the one-time dividend of fossil fuel in population growth.
Only we operate as though this dividend is a given. This is not what the intelligent investor does. She recognises that whilst the diverse portfolio is a hedge against risk, it still needs attention and that returns are not guaranteed even then.
Sustainability is essential if humanity is to survive. This means a resilient base of natural capital—nature operating all its supporting functions—actively managed to build dividends without eroding the stocks.
Ironically this is very familiar to intelligent investors.
Hero image modified from photo by Anne Nygård on Unsplash
Add comment