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We’re not all in it together: the rise of bloated capitalism

Following David Cameron’s speech on moral capitalism last week, Julian Parrott, partner at Ethical Futures, writes how not everyone is in the same boat of austerity. ”Capitalism”, he says, “has grown to bloated excess”.

Fine words and some valid comments and ideas [from Prime Minister David Cameron] but I have yet to see anything that really does bring about a democratisation of capital. This should be an ethical and socially responsible investment opportunity. Sadly I’m not sure that it’s being grasped.

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Following David Cameron’s speech on moral capitalism last week, Julian Parrott, partner at Ethical Futures, writes how not everyone is in the same boat of austerity. ”Capitalism”, he says, “has grown to bloated excess”.

Fine words and some valid comments and ideas [from Prime Minister David Cameron] but I have yet to see anything that really does bring about a democratisation of capital. This should be an ethical and socially responsible investment opportunity. Sadly I’m not sure that it’s being grasped.

I’m all for the development of cooperatives, where genuine opportunity lies for the business, but in the case of some of the mooted developments; it seems to be a back door route to deconstruction of national welfare services. It is not clear to me that the structure and management skill is there to build fully functioning large scale cooperatives.

The Conservative history of popularising democratically owned capitalism is a myth. Margaret Thatcher did not create a share and property owning democracy. She appealed to the base instincts of a financially and economically ill-educated public. She presided over the biggest ‘fire sale’ in British history – selling badly needed social housing at up to 70% discount of value and turning over ludicrously mispriced shares of public utilities to a public who saw it as an opportunity to make a quick buck.

This round was closely followed by the ‘bribing’ of account holders to facilitate the conversion of building societies into banks – a step that took away a 100 years of local community connections and heralded an age that would ultimately end in the financial crisis of 2008.

These shares almost immediately ended up in the hands of major institutions, and as a result, we end up in a nation where the bulk of our utilities are owned by foreign businesses and banking became a casino for the ultra-rich – funded by the common man.

Very little actual engagement in business conduct was ever achieved by this spread of share ownership – nor was there ever an efficient mechanism to connect shareholders together to hold management to account.

The bulk of capital invested in major companies is held by the financial institutions; whilst ethical and socially responsible investment is doing something to influence business activity – even these funds have failed to tackle issues of corporate excess.

Management of funds and major FTSE businesses is a cosy cabal of people with vested interests in short term returns and a bonus culture. Investment managers get bonuses for bench mark performance. They often achieve this by investing in big businesses that focus on short turn returns to maintain share price value. Both parties are complicit in the process and validation of remuneration is supported by non–executives who often sit on each other’s committees.

Management of mega cap businesses is not an entrepreneurial process – it’s the ‘captain of the ship role’; you need to be able to plot a course and steer the business there. We are not dealing with people who have eureka moments and hence may be deemed to be worth the rewards that accrue to genuinely game changing and talented individuals.

Rather, we have allowed an accountancy oriented corporate elite to grow up, who pursue share price growth by acquisition and the slashing of costs of the running of the business for their own self-aggrandisement; constantly inflating each other’s worth well in excess of the value that the business brings to society.

We need the investment management of pension, investment and institutional funds to be far more critical and to actively engage in not only the environmental and ethical dilemmas but in fundamental corporate governance.

If we live in an age where the Conservatives want to encourage greater share ownership – especially amongst staff – then the focus of the business is not solely on profit maximisation.

The objective of the business must be to provide a sustainable business model for continuity of the business, but also to give a fair standard of living and reward to those who contribute to it. That does not means driving down wages whilst execs get bonuses, or slashing staff pensions whilst senior managers salt away millions, or moaning about ‘red tape’ that is there to protect the rights and safety of workers.

Moreover, not only do the individual staff benefit from positive policies, but society does too, because we will have better rewarded employees who are more highly motivated to work and protected to a greater extent in the event or sickness and old age by their employers, and hence less reliant on the welfare of the state.

Instead, we currently have a capitalism that has grown to bloated excess on the opportunity of 30 years of compliant governments to externalise billions of pounds of costs that they should have borne and now the nation is on its financial knees having bailed out the banking industry.

We – the ordinary people – are having those self-same welfare lifelines withdrawn by a government of wealthy elite under the banner of ‘we are all in it together’ austerity.

David Cameron called for a more responsible economy in his speech last week. You can help realise this by choosing to invest sustainably.

Get in touch with your financial adviser or fill in our online form and we’ll connect you to a specialist ethical one.

Julian Parrott is a founding partner of Ethical Futures, ethical specialist independent financial advisers (IFA) based in Edinburgh.

Editors Choice

2017 Was the Most Expensive Year Ever for U.S. Natural Disaster Damage

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Natural Disaster Damage
Shutterstock / By Droidworker | https://www.shutterstock.com/g/droidworker

Devastating natural disasters dominated last year’s headlines and made many wonder how the affected areas could ever recover. According to data from the U.S. National Oceanic and Atmospheric Administration (NOAA), the storms and other weather events that caused the destruction were extremely costly.

Specifically, the natural disasters recorded last year caused so much damage that the associated losses made 2017 the most expensive year on record in the 38-year history of keeping such data. The following are several reasons that 2017 made headlines for this notorious distinction.

Over a Dozen Events With Losses Totalling More Than $1 Billion Each

The NOAA reports that in total, the recorded losses equaled $306 billion, which is $90 billion more than the amount associated with 2005, the previous record holder. One of the primary reasons the dollar amount climbed so high last year is that 16 individual events cost more than $1 billion each.

Global Warming Contributed to Hurricane Harvey

Hurricane Harvey, one of two Category-4 hurricanes that made landfall in 2017, was a particularly expensive natural disaster. Nearly 800,000 people needed assistance after the storm. Hurricane Harvey alone cost $125 billion, with some estimates even higher than that. So far, the only hurricane more expensive than Harvey was Katrina.

Before Hurricane Harvey hit, scientists speculated climate change could make it worse. They discussed how rising ocean temperatures make hurricanes more intense, and warmer atmospheres have higher amounts of water vapor, causing larger rainfall totals.

Since then, a new study published in “Environmental Research Letters” confirmed climate change was indeed a factor that gave Hurricane Harvey more power. It found environmental conditions associated with global warming made the storm more severe and increase the likelihood of similar events.

That same study also compared today’s storms with ones from 1900. It found that compared to those earlier weather phenomena, Hurricane Harvey’s rainfall was 15 percent more intense and three times as likely to happen now versus in 1900.

Warming oceans are one of the contributing factors. Specifically, the ocean’s surface temperature associated with the region where Hurricane Harvey quickly transformed from a tropical storm into a Category 4 hurricane has become about 1 degree Fahrenheit warmer over the past few decades.

Michael Mann, a climatologist from Penn State University, believes that due to a relationship known as the Clausius-Clapeyron equation, there was about 3-5 percent more moisture in the air, which caused more rain. To complicate matters even more, global warming made sea levels rise by more than 6 inches in the Houston area over the past few decades. Mann also believes global warming caused the stationery summer weather patterns that made Hurricane Harvey stop moving and saturate the area with rain. Mann clarifies although global warming didn’t cause Hurricane Harvey as a whole, it exacerbated several factors of the storm.

Also, statistics collected by the Environmental Protection Agency (EPA) from 1901-2015 found the precipitation levels in the contiguous 48 states had gone up by 0.17 inches per decade. The EPA notes the increase is expected because rainfall totals tend to go up as the Earth’s surface temperatures rise and additional evaporation occurs.

The EPA’s measurements about surface temperature indicate for the same timespan mentioned above for precipitation, the temperatures have gotten 0.14 Fahrenheit hotter per decade. Also, although the global surface temperature went up by 0.15 Fahrenheit during the same period, the temperature rise has been faster in the United States compared to the rest of the world since the 1970s.

Severe Storms Cause a Loss of Productivity

Many people don’t immediately think of one important factor when discussing the aftermath of natural disasters: the adverse impact on productivity. Businesses and members of the workforce in Houston, Miami and other cities hit by Hurricanes Harvey and Irma suffered losses that may total between $150-200 billion when both damage and sacrificed productivity are accounted for, according to estimates from Moody’s Analytics.

Some workers who decide to leave their homes before storms arrive delay returning after the immediate danger has passed. As a result of their absences, a labor-force shortage may occur. News sources posted stories highlighting that the Houston area might not have enough construction workers to handle necessary rebuilding efforts after Hurricane Harvey.

It’s not hard to imagine the impact heavy storms could have on business operations. However, companies that offer goods to help people prepare for hurricanes and similar disasters often find the market wants what they provide. While watching the paths of current storms, people tend to recall storms that took place years ago and see them as reminders to get prepared for what could happen.

Longer and More Disastrous Wildfires Require More Resources to Fight

The wildfires that ripped through millions of acres in the western region of the United States this year also made substantial contributions to the 2017 disaster-related expenses. The U.S. Forest Service, which is within the U.S. Department of Agriculture, reported 2017 as its costliest year ever and saw total expenditures exceeding $2 billion.

The agency anticipates the costs will grow, especially when they take past data into account. In 1995, the U.S. Forest Service spent 16 percent of its annual budget for wildfire-fighting costs, but in 2015, the amount ballooned to 52 percent. The sheer number of wildfires last year didn’t help matters either. Between January 1 and November 24 last year, 54,858 fires broke out.

2017: Among the Three Hottest Years Recorded

People cause the majority of wildfires, but climate change acts as another notable contributor. In addition to affecting hurricane intensity, rising temperatures help fires spread and make them harder to extinguish.

Data collected by the National Interagency Fire Center and published by the EPA highlighted a correlation between the largest wildfires and the warmest years on record. The extent of damage caused by wildfires has gotten worse since the 1980s, but became particularly severe starting in 2000 during a period characterized by some of the warmest years the U.S. ever recorded.

Things haven’t changed for the better, either. In mid-December of 2017, the World Meteorological Organization released a statement announcing the year would likely end as one of the three warmest years ever recorded. A notable finding since the group looks at global land and ocean temperature, not just statistics associated with the United States.

Not all the most financially impactful weather events in 2017 were hurricanes and wildfires. Some of the other issues that cost over $1 billion included a hailstorm in Colorado, tornados in several regions of the U.S. and substantial flooding throughout Missouri and Arkansas.

Although numerous factors gave these natural disasters momentum, scientists know climate change was a defining force — a reality that should worry just about everyone.

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Environment

How to be More eco-Responsible in 2018

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eco-responsible
Shutterstock / By KENG MERRY Paper Art | https://www.shutterstock.com/g/kengmerrymikeymelody

Nowadays, more and more people are talking about being more eco-responsible. There is a constant growth of information regarding the importance of being aware of ecological issues and the methods of using eco-friendly necessities on daily basis.

Have you been considering becoming more eco-responsible after the New Year? If so, here are some useful tips that could help you make the difference in the following year:

1. Energy – produce it, save it

If you’re building a house or planning to expand your living space, think before deciding on the final square footage. Maybe you don’t really need that much space. Unnecessary square footage will force you to spend more building materials, but it will also result in having to use extra heating, air-conditioning, and electricity in it.

It’s even better if you seek professional help to reduce energy consumption. An energy audit can provide you some great piece of advice on how to save on your energy bills.

While buying appliances such as a refrigerator or a dishwasher, make sure they have “Energy Star” label on, as it means they are energy-efficient.

energy efficient

Shutterstock Licensed Photo – By My Life Graphic

Regarding the production of energy, you can power your home with renewable energy. The most common way is to install rooftop solar panels. They can be used for producing electricity, as well as heat for the house. If powering the whole home is a big step for you, try with solar oven then – they trap the sunlight in order to heat food! Solar air conditioning is another interesting thing to try out – instead of providing you with heat, it cools your house!

2. Don’t be just another tourist

Think about the environment, as well your own enjoyment – try not to travel too far, as most forms of transport contribute to the climate change. Choose the most environmentally friendly means of transport that you can, as well as environmentally friendly accommodation. If you can go to a destination that is being recommended as an eco-travel destination – even better! Interesting countries such as Zambia, Vietnam or Nicaragua are among these destinations that are famous for its sustainability efforts.

3. Let your beauty be also eco-friendly

eco-friendly

Shutterstock / By Khakimullin Aleksandr

We all want to look beautiful. Unfortunately, sometimes (or very often) it comes with a price. Cruelty-free cosmetics are making its way on the world market but be careful with the labels – just because it says a product hasn’t been tested on animals, it doesn’t  mean that some of the product’s ingredients haven’t been tested on some poor animal.

To be sure which companies definitely stay away from the cruel testing on animals, check PETA Bunny list of cosmetic companies just to make sure which ones are truly and completely cruelty-free.

It’s also important if a brand uses toxic ingredients. Brands such as Tata Harper Skincare or Dr Bronner’s use only organic ingredients and biodegradable packaging, as well as being cruelty-free. Of course, this list is longer, so you’ll have to do some online research.

4. Know thy recycling

People often make mistakes while wanting to do something good for the environment. For example, plastic grocery bags, take-out containers, paper coffee cups and shredded paper cannot be recycled in your curb for many reasons, so don’t throw them into recycling bins. The same applies to pizza boxes, household glass, ceramics, and pottery – whether they are contaminated by grease or difficult to recycle, they just can’t go through the usual recycling process.

People usually forget to do is to rinse plastic and metal containers – they always have some residue, so be thorough. Also, bottle caps are allowed, too, so don’t separate them from the bottles. However, yard waste isn’t recyclable, so any yard waste or junk you are unsure of – just contact rubbish removal services instead of piling it up in public containers or in your own yard.

5. Fashion can be both eco-friendly and cool

Believe it or not, there are actually places where you can buy clothes that are eco-friendly, sustainable, as well as ethical. And they look cool, too! Companies like Everlane are very transparent about where their clothes are manufactured and how the price is set. PACT is another great company that uses non-GMO, organic cotton and non-toxic dyes for their clothing, while simultaneously using renewable energy factories. Soko is a company that uses natural and recycled materials in making their clothes and jewelry.

All in all

The truth is – being eco-responsible can be done in many ways. There are tons of small things we could change when it comes to our habits that would make a positive influence on the environment. The point is to start doing research on things that can be done by every person and it can start with the only thing that person has the control of – their own household.

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