Awareness and opportunity: investing in the next economy

By Scott Secrest

A U.S. economy slowly putting itself back together set the tone for the markets over the past year. While short- term economic indicators continue to be mixed, we are in agreement with the camp of economists focusing on longer term economic fundamentals. There is a growing awareness in the financial world of the implications of an emerging sustainable economy, which supports this longer-term, more holistic thinking.

Heightened awareness is critical during periods of financial uncertainty. Economic risks today exist in at least two key areas: a vanishing middle class, and failing to embrace and benefit from the new economic opportunities in sustainability.

Income inequality in the U.S. has reached astounding levels: not since the Roaring 20’s has the disparity between the top and bottom income tiers in the U.S. been so great. While there is significant ethical hazard to this, it’s really evidence that the middle-class has largely vanished in the U.S. This troublesome situation has been developing for some time as production, and now many service industry jobs, have been relocated to foreign countries.

Perhaps our greatest long-term risk is that of failing to embrace the inevitable shift to an economy geared for low-carbon emissions, clean production-based industries, a viable middle class, and sustainability principles. I say ‘inevitable’ here because this shift will occur one way or the other.America can seize the opportunity to move energetically in this direction now, and create great economic opportunity for ourselves along the way. Or, we can stubbornly hang on to the old, consumption-intensive, waste-producing, dying- industry, and debt-dependent ways of the past. By so doing, we will delay the sustainable economy, or miss out on its rewards as other countries take the lead. But it will come sooner or later, with the slow-motion collapse of systems that we know to be broken. Please review your notes on the financial collapse of 2008-2009 if you have any doubt of this.

Most of those who would deny this necessary economic transformation are sprinkled among the entrenched, old-line businesses of the U.S. – they can see the writing on the wall, but are nonetheless committed to fighting for every dollar of old-model profits every step of the way. As a society, capitulating to these arguments and clinging to the dying ways is indeed our greatest risk, both economically and for the well being of society and our natural environment.

“Long-range planning does not deal with future decisions, but with the future of our present decisions,” Peter Drucker famously observed. Through our collective awareness of this historic opportunity to create a sustainable world, socially responsible investors and clear-thinking mainstream businesses are leading the move of investment dollars toward solution-oriented companies, and it’s never been more important. Research & development departments are today planning for the clean, efficient products that will dominate the markets in decades to come.

The necessity for our economic transformation may be explained by the notion that it is ethically, socially, and environmentally the right course to take, or it could be based simply on a reasoned forecast of where economic opportu- nities lie today – take your pick. Either way, investors with awareness of the coming sustainable economy will be the ones who both ensure its success, and benefit from early investment as it comes of age.

This article first appeared in the Winter 2011 edition of the Natural Investing newsletter

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Scott Secrest

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