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It's a real honor to be here today,
but I have to tell you I'm here by accident.
Not at this conference per se but in finance and banking.
When I went to university, many years ago now,
I studied to be a teacher,
and sadly about halfway through my academic career,
my college discontinued the Education Department.
So I had to look around
to find a discipline that was close to education,
and I found child psychology,
which incidentally has been a terrific discipline
to learn how to manage fund managers and investment bankers.
(Laughter)
In any event, as I got closer to graduation,
I needed to get a job, so I applied to Peace Corps.
I was rejected.
I decided that maybe I should get my doctorate in psychology.
I was rejected.
My father, fearing that I would be returning home
to live with family again, suggested I try banking.
I applied to 70 banks. I was rejected by 69.
All of them were around my room.
But I got one "Yes", which is why I am now in finance.
My partner, Al Gore... and we're not going to do the blood and gore joke.
But we could do, I guess.
My partner, Al Gore, likes to tell a story
that he is a recovering politician on about stage 9.
Yet I've never thought of myself as a recovering investment banker.
And believe it or not, when I started in finance nearly 30 years ago,
I didn't believe that I'd have to check my values at the door.
I believed then, as I believe now,
that finance and business can be a force for good.
Now I recognize that given what's happened in the last decade
and certainly over the last five, six years
that what I just said seems very silly.
And I recognize that the world financial systems are in turmoil.
Capitalism is in crisis.
And indeed, those of us in finance and banking
are very close to losing our license to operate.
When you think about the current financial system, or capitalist system,
the words that the Chinese philosopher Lao Tzu really resonate.
What he said is, "If you don't change direction,
you might end up where you're heading." (Laughter)
If we don't address the problems with capitalism in business today —
the problems of rising inequality,
a constant focus on the short term,
misaligned and outsized incentives, and no price and externalities —
we will indeed get where we're heading,
and it won't be a very good outcome.
At best we won't be using our capitalist system
to the benefits that it can develop in terms of economic growth,
and at worst, we will create financial havoc,
which we've seen very recently.
So let's face it. The stark reality today
is that the challenges facing the world
are extraordinary and unprecedented.
Whether you think about health,
about climate change,
whether you think about poverty,
water scarcity, disease, migration,
population growth? These are all significant challenges.
And the truth is: while government and civil society
will need to be part of the solution,
they can't be the only part of the solution.
Indeed, capital markets, investors and business
will have to drive capital to address these challenges.
This is why we've talked about a new paradigm in finance —
what we call sustainable capitalism.
Sustainable capitalism is really designed to integrate
environmental, social and governance issues
into decision-making,
into understanding risks and opportunities of business.
It encourages us to develop long-term
economic strategies and growth, and it puts a price on carbon.
Now I'm not going to go through the business case
for sustainable capitalism today,
but, believe me, the case is extremely robust.
One important aspect of sustainable capitalism
is the notion that you can take
other capital markets' tools and business techniques
to address society and environmental challenges —
what is increasingly called "impact investing".
What impact investing is,
is addressing social and environmental challenges
in both the developed world and the developing world
through business and capital.
It can be thought of as an asset class,
much as the way as hedge funds were in years gone by,
and it is very varied.
It can be investing in social entrepreneurs.
It can be social impact bonds
that provide capital to not-for-profit organizations,
that allow them to execute long-term programs
to address society challenges.
It can be the financing of the transition to a low-carbon economy,
or in fact putting prices on environmental services.
The array of returns can vary as well — does vary as well.
It can be no concession at all,
i.e. extraordinary returns and impact,
and it can go all the way to the point where in fact
you trading of return for impact.
The investment case, though, for impact investing
is really quite compelling,
particularly from an asset allocation perspective.
It's non-correlated, which is why it is particularly interesting.
And I reckon that over the course of the next ten years or so,
impact investing will be something in the order of five to ten percent
of both institutional and high-net-worth people's portfolios.
But the reason why we should care about impact investing
is we know that the markets cannot solve
society's challenges or environmental challenges
in and of itself.
We also know that philanthropy is not large enough
to address these challenges.
We have to find a way to leverage and enhance philanthropy,
and that's what impact investing is designed to do.
It's new. We're really in the early stages,
but it's an important component
of how we can create a more sustainable form of capitalism.
Now I want to go back to the notion
of whether finance and banking can be a force for good.
Robert Shiller, the Yale economist,
wrote in his book, Finance and Good Society,
that finance has the potential
to provide hope for a more fair and just society.
I think it's time that we in business
and in finance realize that potential.
You might say, "Well, why should I care? What's in it for me?"
And I think that for many, the answer will be
it's because it's a good business decision —
the whole business case for sustainable capitalism.
For others, they will recognize
that their license to operate is truly impaired
and they need to change,
and this what would enhance their license to operate.
But for others, and for me, it's much more than that.
It's that we now have the tools — the financial tools —
to address the challenges that the world faces,
and address them at a time when it's absolutely critical.
And isn't it time that we begin to think of things
on basis of "What is the right thing to do?"
Because indeed, this is the right thing to do.
Thank you. (Applause)