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Money Matters

Can You Overcome Your Immunity to Change?

In their Harvard Business Review article and their book Immunity To Change, Harvard’s Robert Kegan and Lisa Lahey describe how the reason most people don’t make changes, even though they know how to, is because they are subject to Big Assumptions:

These are ways of understanding ourselves and the world (and the relationship between the world and ourselves) that we do not see as mental constructions. Rather, we see them as truths, inconvertible facts, accurate representations of how we and the world are.  These constructions of reality are actually assumptions.

In the case of responsible investment some the Big Assumptions that stop many people investing responsibly are:

3 Reasons why Investors don't Invest Responsibly     1. I can’t make a difference
     2. I can’t make money and make a difference
     3. My investments are already responsible

Let’s consider each of these in turn:

1. I can’t make a difference

By pooling your money with others you can vote with your money and make a difference. Of the many examples of how responsible investment has made a difference one of the most striking is that Nelson Mandela’s first visit to the USA after being freed from prison was to meet with those who had called for divestment from South Africa. His words, ‘It always seems impossible until it is done’ highlight the challenge to see that you can make a difference.  Another strong proponent of responsible investment was Anita Roddick, Founder of the Body Shop, who maintained, ‘If you think you’re too small to have an impact, try going to be with a mosquito.

2. I can’t make money and make a difference

There is extensive evidence that responsible investment can do well financially. Complementing extensive academic research, the Responsible Investment Association Australasia Annual Benchmarking Report for 2013 showed that five-year returns had been stronger in all core Australian responsible fund categories compared with the benchmark and average mainstream funds and that these funds had delivered better returns than the benchmark and the average of all mainstream funds in all but one category across 1- ,3-, 5- and 10-year time periods. Another perspective come from the international legal firm Freshfields, which maintained that failure to assess Environmental, Social and Governance issues may well breach a trustees duty to act in the best interests of a scheme’s beneficiaries.

3. My investments are already responsible

Unless portfolios are explicitly managed to responsible investment criteria it is likely they will include a material exposure to investments that many responsible investors would want to avoid. For example, many portfolios will include investments is companies involved in the production of tobacco or activities such as gambling. It is also likely that conventional portfolios will include businesses with relatively poor environmental records.

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  • The Origins of Responsible Investment
  • The Four P's Model of Responsible Business
  • Doing Well and Doing Good
  • How Responsible Business Can Do Well
  • UN Principles for Responsible Investment
  • What Type of Investor Are You?
  • Can You Answer YES to The Big Questions?
  • Can You Overcome Your Immunity to Change?
  • Next Steps
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