Last week I spoke at the Responsible Investment conference in Sydney and what amazes me is that while I’m in a room of 300 investors who understand ESG, but even the savvy investors don’t comprehend the pace of DISRUPTION.
We are all too entrenched in our own industries not to see what is coming.
The keynote speaker was James Seba from RethinkX out from the US. 3 years ago, he predicted electric vehicles would be $35K, people said he was crazy (See Tesla for evidence he was right!). He is an expert is disruptive economic models, he now says EVs will be only $22,000 by 2021, so bye bye V8s, but more so as he says,
“What about oil? What about coal? Gone, GONE!”
We need a new breed of director who can look to the future, who understands the new economy and can challenge the executive on what they’re not doing. If they are not investing in tomorrow, then they are not doing their job, so send them packing. Artificial Intelligence is a $2.1 trillion economic opportunity into 2030 for Australia and <5% of ASX200 are deploying A.I. This is a concern. Cyber security attacks will continue to happen and climate risk is not even thought about BUT the World has set a Global Carbon Budget (we are signatories) and whether our politicians like or not, we have enormous liabilities on our balance sheets.
To give this substance, when we were considering the Carbon Price Reduction Scheme in 2009, economists had produced financial models that AGL (remember you have to pay for your pollution every year) was estimated to have an ANNUAL liability of $600M, yes over half a billion dollars PER YEAR. Trust me, my search firm had a $1.5M carbon trading team of 5 pending board approval for a major resources company, which obviously didn’t happen, but that’s how much they were going to pay to exploit the carbon markets. ESG is fundamentally business risk and so the AFR article yesterday, “Boards Face More Questions over Social and Environmental Issues” with Sam Mostyn outlines this.
Here are the statistics Boards need to ponder:
- If 3 or more women on boards of S&P500 company boards versus none, they achieve 36% greater return on equity
- Females are 51% of Australia population, and women make 85% of purchase decisions
- A.I is the biggest economic opportunity of our time and <5% of ASX200 get it
- Stanford Centre for Corporate Governance states that 92% of directors in the US are not equipped to deal with cybersecurity risk
- Less than 40 of the ASX200 have disclosed their climate risk and very few understand ESG
Australia, whether you like Tech Entrepreneurs or not, one in this nation is Matt Barrie from Freelancer, he has 26 million users across the globe, that’s more than our entire population, he knows global markets. Read the state of the nation from his perspective – Australia is a House of Cards. Most economic cycles are 7-10 years, Australia is now in it’s 27th year of economic growth, 105 Quarters, we broke the World Record over Holland earlier this year. But didn’t they say, what goes up, must come down?
When Amazon has arrived and about to unleash themselves, we still think it will be OK. The UBS Analysts say they will gain 2% market share in 5 years. I say ‘what are you smoking?’ They have 1 in every $7 in eCommerce across the US, their biggest market share outside the US is Australia, 19%, they own Whole Foods (5X Coles and Woolworths put together), they have the most seamless logistics system in the world, they have a market cap of c.$US550Bn, the are a “weapon of mass disruption”. DISRUPTION is here, just ask the Cab drivers, ask the newspapers, ask Kodak.
Are we ready for disruption? No. Can we be? Yes. We need bold business leaders and Chairs of Boards to take hold, we need to consider more female digital aficionados like Jess Rudd appointed onto ASX200 AAco Board last week, first ever female director, she’s only 33. We need more Entrepreneur-in-Residence directors, more Digital Governance and CX oversight, and yes, we need more ESG thinkers.
One of Australia’s Leadership experts asked me my opinion on why we should be optimistic, I responded somewhat tongue in cheek, he asked me to respond again “but in the Warwick optimistic way”, so I did in a similar vein, there is optimism in what I say, just not how he’d like me to write it so I’ll publish it because he won’t.
“The case for optimism stems from my belief in robots shaking the life out of us! If the Edelman Trust barometer states 85% don’t trust the system and Gallup says that only 15% are thriving at work, then humanity is somewhat dead. Many of us in the western world are asleep at the wheel, we are digital consumers of nonsense, we are often self-driven egos striving for what? We need to better address mindfulness and equip ourselves with the joys of life, to be, not to have. Artificial intelligence will leapfrog those who are not solving real problems and those who are not passionate about purpose, and so the machines and human interaction will harness the rise up for better solutions for our planet and society. My optimism stems from the machines teaching us how to thrive in life again, because A.I and tech enabled solutions to enormous problems like climate change, health, food security and water scarcity will be in our grasp, we will regain empathy, we will relearn to be. To be or not to be”