What Eco-Friendly Spandex Can Teach Us about Long-Term Value Creation

This month San-Diego start-up Genomatica announced a breakthrough in the field of sustainable chemicals-they successfully converted natural sugar into BDO, an industrial plastic used to make fibers like Spandex. BDO has historically been manufactured entirely with fossil fuels, and now a renewably sourced, cheaper option appears within our grasp.  In order to move such technological developments from lab to market, companies like Genomatica generally depend on private financial markets.

While I won’t argue the world will be a better place with more Spandex (in fact, quite the opposite is true!), Genomatica’s success exemplifies how private markets can advance public priorities.  Channeling capital to innovative companies is an integral piece of the sustainable finance puzzle, but the field is much broader than venture capital.  Great challenges -and opportunities – exist in helping blue chips and small caps transform into sustainable enterprises.   Not everyone can manufacture plastic from sugar, but packaging can be lighter, emissions lower, and labor standards more equitable everywhere you look.

In my inaugural post as a guest blogger on JustMeans, it’s perhaps useful to explain how sustainability applies to investing from my point of view.  I’m eager to have any number of conversations with the JustMeans community (Does greater transparency in business improve corporate impact on human rights? The pros and cons of microfinance going commercial, How will new credit card regulation affect the industry, and you and me, in the long run?), but step one is laying a foundation.

Though “sustainability” is becoming ubiquitous in our collective lexicon, I believe it still holds meaning for most of us.  People understand that achieving sustainability-whether in the global economy, personal finances, a corporation, or agriculture-requires meeting current needs without undermining the ability to meet future needs.

It is the duty of sustainable finance to channel capital into companies and ideas that create long-term value.  Understanding how a corporation adds to, or detracts from, society and the environment, as well as the economy, helps us predict its health 20, 50, and 100+ years from now.  A measure of long-term viability that includes environmental and societal performance requires us to shift our vision beyond quarterly earnings to a paradigm of success founded on meeting today’s needs without compromising our ability to meet them tomorrow. Sustainable investment strategies ideally feed enterprises that operate within this paradigm and starve others.

Thoreau reminds us that “things don’t change; we change”.  A commitment to sustainable finance involves managers changing the way they operate businesses and shareholders broadening the way they measure the value of their portfolio.  It involves all of us shifting our view of wealth to include not only improvement of financial standing, but also the enrichment of our world for future generations.  It is from this vantage point, which will continue to evolve and grow, that I hope to engage in conversations with the JustMeans community about sustainable finance.  Onward!