Current State
Current State
Indeed, over the past 200 years, substantial progress has been made in almost every single measure of human well-being.[6] Since 1820, the share of those living in extreme poverty, defined as living on less than $1.90 per day, has fallen dramatically from just under 90% to less than 10% of the population in 2015, the last year for which data is available. This change is especially dramatic given the 7-fold increase in population.[7] Additionally, there have been huge global increases in literacy, health, and education. Today, child mortality in the worst-off places is between 10-13%, far lower than the global estimates of 43% child mortality by the age of 5 in the early 19th century.[8]
However, these gains are not without costly challenges, the scale of which has become unmanageable. Today, the very systems which brought such tremendous growth are also the cause of negative environmental, employment and product level impacts which cannot be solved within the current information and incentive structures.
Environmental Challenges
The planet and its climate are at a turning point. Today, the concentration of CO2 is at its highest level in over 800,000 years, at 413 parts per million, which substantially exceeds all natural fluctuations and the prior high of 300 parts per million, reached over 300,000 years ago.[9] A preponderance of evidence suggests that this rise is a direct result of human economic activities since the Industrial Revolution. This has already led to an increase of 1.0 degree Celsius in average global temperature since 1880 and an average sea-level rise of over 2.6 inches with an accelerating rate of annual increases.[10] Global leaders met in Paris in 2015 and made voluntary commitments in an attempt to limit global temperature rise to 1.5 degrees Celsius. However, the 2014 release of the Fifth Intergovernmental Panel on Climate Change (IPCC) forecasts between 2 and 4 degrees Celsius rise by 2100, and a 2018 special report by the panel suggested that the commitments under the Paris Agreement would likely need to be significantly increased given current trends in CO2 output.[11] This will have profound effects on sea-levels, storm intensity, and water and food availability. Sea levels are expected to rise by between 0.52 and 0.98 meters by 2100, while more recent projections show as much as a 2 meter rise, displacing hundreds of millions globally.[12] Further, the UN has already linked climate change with increasing land degradation, desertification and rising hunger, as exemplified by severe water shortages in major metropolitan areas of Cape Town and Chennai.[13] Globally, we are now consuming 1.7 times the annual production of the planet and it is estimated that if the entire world’s population had the same consumption levels as those in the United States, it would take five planets to support it.[14] Finally, extinction rates are rising and stand between 1,000 and 10,000 times the natural extinction rate.[15] Many studies have shown substantial declines in insect populations globally, representing an enormous risk at the base of the food chain.[16]
Social Welfare Challenges
Numerous employment trends are also creating welfare dispersions. Even in the wealthiest developed economies, there are massive disparities in wealth and income that have substantial consequences for the health, happiness, and security of workers. In the United States, income inequality has risen in every state since the 1970s, and the top 1% of families captured 58.7% of all income growth from 1973 to 2007 and 41.8% of income growth from 2009 to 2017.[17] Increasingly, workers are subjected to low wages, poor job training, meager benefits, and uncertain work hours as corporations try to cut costs.[18] Some estimates place the number of working poor at 12 million and 40% of Americans cannot absorb an unexpected $400 expense.[19] These pressures have resulted in epidemics of stress and depression. In its 12th annual survey on Stress in America,™ the American Psychological Association continued to document worrying levels of stress. Generation Z, comprising those born between 1997 and 2003, is more likely than all other generations to be diagnosed with an anxiety disorder (18%) and depression (23%). 91% of those in Generation Z report having experienced at least one physical symptom of stress in the past month compared to 74% of adults overall.[20] For two years in a row, life expectancy in the United States has declined, attributable to opioid deaths and suicides.[21] While many of the precise mechanisms behind these trends are still being investigated, the presence of such trends within a country as developed and wealthy as the United States point to underlying challenges within the current economic system.
Product Challenges
Many products that companies produce and sell have far ranging impacts that may be challenging to directly attribute, but which are very real nonetheless. Tobacco and cigarettes are among the most obvious for the externalities they impose. Other examples of products’ negative externalities can be found in the food industry and its role in the huge increase in obesity to 61.1% in the Americas, 54.8% in Europe and 46.0% in the Eastern Mediterranean, as well as the associated increase in heart disease and diabetes.[22] The massive opioid epidemic in the US is another clear example.
A Changing Paradigm
Amid these challenges, many leaders in the business, economic, nonprofit, investing, and NGO sectors and beyond have begun work to quantify the impacts of their activities and to shift the balance of their impacts from negative to positive. Among the most notable changes are the shifting awareness and proactivity among entrepreneurs, business leaders and investors.
As previously described, many companies are now reporting ESG and sustainability factors. The largest 100 companies in each of 49 countries (4,900 companies) that issue sustainability reports grew from 12% in 1993 to 75% in 2017.[23] Further, the 2017 Task Force on Climate-related Financial Disclosures (TCFD) Recommendations received public expressions of support from over 617 organizations with more than $8 trillion in market capitalization, though a recent review by the Climate Disclosure Standards Board suggested only a small minority of these have authentic TCFD disclosures in their recent reports.[24] However, the substantial number of firms supporting these recommendations suggests that firms see a value in signaling their desire for sustainability to the market. Increased interest in such practices by investors is likely to reinforce the value of authentic signaling by companies.
Over the course of a decade, the impact investing universe has gone from a small subset of investors to a substantial investment base. The Global Impact Investing Network (GIIN), estimates that the impact investment sector stood at $502 billion AUM at the end of 2018.[25] The IFC estimated that approximately $34 trillion of investor assets have some ESG screening or engagement.[26] To date, over 2,300 asset managers have signed the UN Principles of Responsible Investing which offer a set of six actions for incorporating ESG issues into investment practice.[27] In 2018 iShares reported that there are over 1,000 ESG indices, a major increase from 1990 when the First ESG Index, the MSCI KLD 400 Social Index, was launched.[28] The IFC estimates that there are $71 billion of assets invested in private investment funds with intent for and measurement of impact across 417 funds.[29] Additionally, hundreds of investors and other financial institutions with over $100 trillion in assets under management have supported the TCFD recommendations.[30]
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- Stephen Pinker, “The World Has Made Spectacular Progress in Every Measure of Well-Being. So Why Does Almost No One Know about It?,” World Economic Forum (blog), May 1, 2018,.
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- Max Roser, “The Short History of Global Living Conditions and Why It Matters That We Know It,” Our World in Data (blog), accessed July 9, 2019.
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- Max Roser, “The World Is Much Better; The World Is Awful; The World Can Be Much Better,” Our World in Data (blog), October 31, 2018.
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- “Daily CO2,” CO2.Earth, accessed June 25, 2019.; Dieter Lüthi et al., “High-Resolution Carbon Dioxide Concentration Record 650,000–800,000 Years before Present,” Nature 453, no. 7193 (May 2008): 379–82.
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- Masson-Delmotte, V., P. Zhai, H.-O. Pörtner, et al. (eds.), World Meteorological Organization, Geneva, Switzerland “Global Warming of 1.5°C: An IPCC Special Report on the impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty. Headline Statements from the Summary for Policymakers,” IPCC, 2018. accessed July 9, 2019,.; National Oceanic and Atmospheric Administration US Department of Commerce, “Is Sea Level Rising?,” accessed July 9, 2019.
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- Matthew Collins et al., “Chapter 12 Long-Term Climate Change: Projections, Commitments and Irreversibility,” IPCC Fifth Assessment Report (IPCC, 2013).page 3.; Masson-Delmotte, V., P. Zhai, et al (eds.), World Meteorological Organization, “Headline Statements.”
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- John A Church, et al., “Chapter 13 Sea Level Change,” IPCC Fifth Assessment Report (IPCC, 2013). page 4; Jonathan L. Bamber el al., "Ice sheet contributions to future sea-level rise from structured expert judgment," Proceedings of the National Academy of Sciences of the United States of America (2019).
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- “UN Warns Climate Change Is Driving Global Hunger | UNFCCC,” September 12, 2018.
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- “Infographics,” Earth Overshoot Day, accessed July 9, 2019.
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- “How Many Species Are We Losing? | WWF,” accessed July 9, 2019.
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- Brooke Jarvis, “The Insect Apocalypse Is Here,” The New York Times, November 27, 2018, sec. Magazine.
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- Estelle Sommeiller, Mark Price. “The new gilded age: Income Inequality in the U.S. by state, metropolitan area, and county” in Economic Policy Institute, July 19, 2018, pages 3, 4.
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- Zeynep Ton, “Why ‘Good Jobs’ Are Good for Retailers,” Harvard Business Review, January 1, 2012.
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- Zeynep Ton, “Raising Wages Is the Right Thing to Do, and Doesn’t Have to Be Bad for Your Bottom Line,” Harvard Business Review, April 18, 2019.; “An Overview of America’s Working Poor | PolicyLink,” accessed July 9, 2019.
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- “Stress in AmericaTM Generation Z Survey,” Stress in America (American Psychological Association, October 2018). page 4.
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- Robert R. Redfield, M.D, “CDC Director’s Media Statement on U.S. Life Expectancy | CDC Online Newsroom | CDC,” April 10, 2019.
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- Hiroshi Yatsuya et al., “Global Trend in Overweight and Obesity and Its Association with Cardiovascular Disease Incidence,” Circulation Journal: Official Journal of the Japanese Circulation Society 78, no. 12 (2014): 2807–18.
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- Jose’ Luis Blasco, Adrian King, et al., page 9.
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- “TCDF Implementation Guide: Using SASB Standards and the CDSB Framework to Enhance Climate-Related Financial Disclosures in Mainstream Reporting” (SASB Foundation and CDP Worldwide, 2019). page 4.
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- Mudaliar Abhilash, Hannah Dithrich. “Sizing the Impact Investing Market.” Global Impact Investing Network. April 2019.
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- “Creating Impact: The Promise of Impact Investing” (International Finance Corporation, April 2019). page 15.
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- “About the PRI,” PRI, accessed July 9, 2019.
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- Sarah Kjellberg, Tanvi Pradhan, and Thomas Kuh, “An Evolution in ESG Indexing” (iShares by Blackrock, 2018). page 6.
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- “Creating Impact: The Promise of Impact Investing,” page 16.
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- “PRI | Signatories,” accessed July 2, 2019; “TCDF Implementation Guide: Using SASB Standards and the CDSB Framework to Enhance Climate-Related Financial Disclosures in Mainstream Reporting,” page 4.