Serial Entrepreneur. Digital Award Winner, Mentor, Board Advisor, Founder and CEO of LookStyler, a global fashion tourism marketplace.
While the concept of free market capitalism dates back to the 18th century when Adam Smith published his groundbreaking book The Welfare of Nations, the concept of conscious capitalism is much younger. Smith’s theories are the backbone of today’s free market economics, but the world has changed and evolved rapidly. Ten years ago, Raj Sisodia and Whole Foods co-founder John Mackey coined the term “conscious capitalism.”
The theory of conscious capitalism is based on four pillars: higher purpose, stakeholder orientation, conscious leadership and conscious culture. Conscious capitalism is a form of capitalism that goes beyond the ideology of profit maximization by building businesses that are creative and innovative, generating and multiplying both social well-being and personal development. Conscious companies generate wealth for the entire community by embedding diversity, inclusion, well-being and human rights into their core activities.
After working in the technology space for 10 years, I am now working to build a fractional investment fund for real estate, private equity and startups that democratizes investment and uses artificial intelligence. In my opinion, the companies – and investors – of the future will need to become ethically and socially responsible as this approach brings numerous benefits to employees, customers and business owners. In 2017, Mackey’s Whole Foods business was acquired by Amazon for $13.7 billion, which to me is proof that mindful businesses can be very profitable.
The rise of ethical investing
Ethical investing is an investment strategy that is embedded in ethical decision-making with multiple dimensions, such as environmental, social and corporate governance (known as “ESG”). Ethical investments are tied to an investor’s moral, social and environmental values, and inclusive investment decisions can bring about far-reaching positive change. There has been one in recent years increase in ethical investing. In 2021, Bloomberg Intelligence reported that ESG assets are on track to outperform $53 trillion by 2025.
Moral investing is important because funding ethical companies can enhance the effects these companies create in society. I believe that morally flawed leaders can do more damage when given access to capital because they can serve their own interests, while ethical leaders, on the other hand, ensure that their companies not only generate profits, but also benefit society as a whole. In my opinion, ESG standards should be at the forefront of any regulatory decision-making policy.
ESG investing can deliver numerous environmental, social, economic and cultural benefits. Long-term sustainability requires cultural inclusion, gender diversification and ethical behaviour. From my perspective, these are some of the standards that could increase future investment returns.
I think we would benefit from an official ESG ranking for every major investment fund and company. Scoring can cause certain issues as we still don’t have tangible market benchmarks and standards. However, I believe that machine learning and AI tools can facilitate this implementation.
How investors can adapt
The world of venture capital and private equity investments has been lacking diversity for years. As investors often say, diversification is at the heart of any smart investment decision. That’s exactly what I think investment funds struggle with. A quote famously attributed to businessman and investor Robert Arnott describes it nicely: “In investing, what is comfortable is rarely profitable.” From my perspective, the investment comfort zone seems to be limited to investors who continue to invest in the same type of companies and the same type of entrepreneurs.
In my opinion, investments should be as diverse as society. So investors could become more ethical by thinking about the social benefits first, considering the impact of their decisions, engaging with more diverse stakeholders, holding companies accountable and raising the bar for themselves and those around them .
Investors could also use their shareholder rights to advocate for change or demand the publication of annual sustainability reports. From my perspective, a public scoreboard that tracks performance would probably also contribute to more conscious investment. Perhaps if more mutual funds offered the option of partial ownership, this would also increase liability.
Generative AI, a form of AI that creates content in response to user prompts, has already had a major impact on the world of investment and finance. AI tools can be used to make decisions and make more informed predictions, and they can improve data screening and processing. A lot of financial analysts see their jobs change rapidly as AI can analyze the market, highlight investment opportunities and process data quickly. I believe AI will create new jobs, especially for AI administrators who need to manage AI tools efficiently.
From my perspective, ethical investment tools can be used to give top scores to mutual funds with the widest range of portfolios. Screening investment processes that are now largely obscure could become more transparent with the help of ethical AI tools. Greater speed and efficiency in investment could be coupled with a more human approach to investment. Ethical AI is needed because responsible use of this technology can help prevent prejudice based on race, gender and nationality. Thus, using AI for ethical and fair investment screening could help provide entrepreneurs with fairer access and equal treatment.
We live in critical times, where rapid technological progress could creating a wider wealth gap. Fair investments are important because I believe they can serve as leverage for a fairer society. As Einstein is known, “The most important human endeavor is the pursuit of morality in our actions.” Investment morality is the next thing to strive for.