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Reimagining Capitalism

Enter the purpose-driven firm Businesses, Professor Henderson argues, can and should address these issues. One answer, she says, is purpose-driven firms. Such firms stand to become profitable and competitive in a world where society increasingly recognizes their importance. “This was perhaps best exemplified when Larry Fink’s 2019 letter to CEOs came out. “Fink is the CEO of BlackRock, the largest asset manager in the world with over $6 trillion in assets under management. His letter suggested that business should care not only about shareholder value but also about social purpose. “One CEO friend phoned me and asked, ‘he’s not serious, is he?’ He initially thought all the interest in sustainability stuff was just talk, but over time he began to realize that everyone he was trying to hire believed it was important,” says Henderson. And, it seems, BlackRock isn’t an exception. “Take Unilever. They claim their fastest growing brands are their purpose-driven brands—indeed that these brands are growing at twice the rate of conventionally managed brands. “Purpose-driven firms have a significant advantage in attracting talent. Many of the smartest, most creative, and most imaginative people want to play a part in these kinds of companies. For several years, for example, Unilever was included in the list of the top 10 most desirable employers on LinkedIn.” Hiro Mizuno, Executive Officer and Chief Investment Officer of the Government Pension Investment Fund of Japan (GPIF), which oversees $1.5 trillion in assets under management, is another strong proponent of business paying attention to the big problems. “Hiro says, ‘You know, I have to be able to pay pensions in 30 and even 100 years from now. If global warming does what the scientists say that it will, this ability will be seriously at risk.’ He tells me, ‘I have a financial interest in the externalities because I have to hold the market. I cannot diversify away from the systemic risk.’ “It turns out that Hiro is both bottom line focused and purpose-driven,” says Henderson. “He thinks it’s not okay that the economy in Japan is going south. He is going to push ESG on every asset manager in the world. He is going to tell all his asset managers they have to pay attention to this and that they have to do something, since systemic risk is such a crucial issue for the long-term stability of GPIF.” Reimagining capitalism “I think capitalism is fabulous. It’s an incredible source of growth and opportunities. But if markets are distorted it’s no longer fulfilling its potential. If there’s no real equality of opportunity for example, then markets may not maximize either prosperity or freedom. “It’s a mistake to put your head down and say, ‘All I have to do is maximize profits.’ People will come to you and say, ‘These problems—the inequality, the environmental destruction—this is your fault.’ You should at least have a response to that. Simply saying that government is going to fix it just won’t be compelling.” Can businesses change the world? They can and should, says Professor Henderson. And together, we can see to it that they will.

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