World Economic Forum founder Klaus Schwab said in an online discussion on April 20 that he would like to have a good talk with Warren Buffett. Schwab reportedly said Buffett's focus on shareholder profitability over social issues such as climate change could one day backfire. In an interview with the Financial Times last year, Buffett said companies should focus on creating shareholder value rather than taking shareholders' money to invest in social causes such as climate change.
Judging Buffett's attitude toward climate change based on only the words reported by the media may not be rigorous. In the early years, reporters also asked whether his company's power plants and related businesses would be far away from fossil fuels. Buffett's statement at the time was that there was no doubt that Berkshire Hathaway would expand its use of alternative fuels. In this regard, Schwab shouted in the air to emphasize to business leaders the ideas he had put forward in 1971. As stated in the new 2020 Davos Declaration, businesses are accountable not only to shareholders, but also to the planet. The purpose of the existence of the enterprise is "to involve all stakeholders in shared and continuous value creation".
Yes, from the pursuit of profit maximization to serving stakeholders. The new Davos Declaration came at a time when there was no global pandemic of COVID-19. Today, the whole world is still working hard to fight the new crown epidemic, the epidemic is still raging in many places, the number of infections and deaths is updated every day, business is shut down, and the industrial chain and supply chain are extremely unstable... This situation makes us think more calmly about Schwab's proposition.
Perhaps it is the epidemic that makes more people admit that grand narratives such as climate warming and the community of human and natural life are actually closely related to every enterprise and everyone. The pandemic has highlighted the fact that every business is part of a social organism. Without regard to the interests of stakeholders, it is impossible to maximize the profits of individual enterprises and create value for shareholders. Even those who regard the creation of value and profit for shareholders as the only purpose of survival, if they are willing to look at it from a longer-term perspective, may agree that if all enterprises are unwilling to pay more attention to stakeholders and do not see themselves as part of a social ecosystem, then the other side of this value creation is likely to be the overall social value and loss of human well-being that cannot be covered.
Even from the perspective of individual enterprises, the philosophy of stakeholders and the maximization of shareholder value do not conflict. In Edelman's 2020 survey of more than 600 institutional investors worldwide, 97 percent of respondents said multi-stakeholder governance initiatives were "better than other models to deliver long-term financial returns." It is understandable, therefore, that measuring a company's performance not only in terms of shareholder returns, but also in terms of how it achieves its environmental, social and governance goals, has made impact investing a growing trend.
Back to the reality of China. Carbon peaking in 2030 and carbon neutrality in 2060 is a solemn commitment. From the perspective of the enterprise, this is also a hard indicator of life and death. But companies are by no means passive policy responders. For the part of governments, there is a need for better incentives for technological innovation. Clean energy substitution ultimately depends on technological iterations, especially at the same or even lower cost. If innovators are not allowed to fully enjoy the fruits of innovation, it is difficult to make them do their best without distraction.
Although carbon peaking and carbon neutrality are hard constraints, relying solely on administrative means may not work. We believe that the appropriate mechanism design can fully mobilize the enthusiasm of the market, so that enterprises are willing to invest in green and pay the cost of carbon reduction; so that enterprises that do so can enjoy the convenient channel of financing, and thus get more investment capital options. In other words, this should become part of the competitiveness of the enterprise.