Fear, Fortitude & the Future: Toward Investor Standards Based on History for Gauging Preparation for Warming

          Note:  This post is a revised version of a talk I gave at the 24th annual Conference on Sustainable, Responsible, Impact Investing sponsored by First Affirmative Financial Network (FAFN) on October 29 in Colorado Springs.


St. Paul, MN:  Saints right fielder  July 23, 2012
St. Paul, MN: Saints right fielder July 23, 2012

           Fall.  FAFN.  Friends.  They go together.  Thank you, George Gay.  Thank you, Steve Schueth for 24 remarkable years[1] – and for inviting me to speak again this year.

           Thank you Mel Miller for your introduction.  And, for inviting me to Dubuque for two glorious fall days in 1990.  Meeting you, seeing what you and Heartland[2] were doing convinced me SRI would succeed.

           Look at us now!


           Apart from SRI’s pleasures and happy memories, I love fall for another reason: my favorite sport, football.

           From Thursday through Monday, the concussed entertain the brain dead.  Then Tuesday over lunch at a sports bar, ‘The Injury Report’ shows over and over players crunching to the turf at hideous angles.  It’s great snuff!

           But think about the football ad placements.

           AFLAC.  Allstate.  Farmers Insurance.  Geico.  The General.  Liberty Mutual.  Nationwide.  New York Life.  Pacific Life.  Progressive.  State Farm.  USAA.

           Ah!  The Pacific – Life – Scoreboard.  Brings to mind Grantland Rice’s lines:

For when the One Great Scorer comes to write against your name–
He marks – not that you won or lost – but how you played the game.

 Maybe.  But not on fall weekends.  Not in financial services.


           So what are the insurers telling you – those jolly green geckos … paddling porkers … lunatic professors?

           They’re telling you that – compared to the football interrupting their ads – storm damage, car wrecks, deaths in the family, are about as upsetting to the prepared (their insured) as sitting on a WHOOPEE cushion at an 8 year old’s birthday party.

           Why?  Because they can fix it – and you – for short money, compared to the alternative.

           TV insurers are selling risk management.  Just like 2&20 hedge funds.


           Risk management is a fear sale – whether the potential buyer is an individual or a college endowment.

           With all the modeling and professional advice available to institutions, it’s easy to think of them having different fears from individuals.  But people with individual fears and aspirations make institutional risk management decisions.  And not in a vacuum.

           My old friend from KLD days, Randy O’Neil, reminded me of the concept of the universal owner.[3]  Robert Monks and Nell Minow came up with the idea 20 years ago.  I like the elaboration MSCI’s Roger Urwin gives it:

Universal owners are asset owners who recognize that through their portfolios they own a slice of the whole economy and the market.  They adapt their actions to enhance the return prospects of their portfolios, and hence the prospects for the whole economy and the market as well.  This approach is a logical but ambitious interpretation of investing sustainably.

 No ‘invisible hand’ here!

           We’re well beyond the time when the notion of universal ownership applied solely to institutions.  Of necessity, we’ve had to make asset ownership truly universal because we share the same fears and risks.  We all are universal owners.


           Nestled amongst insurance spots is a Google ad.  In it a pre-teen boy triumphs over his fear of speaking in public – and gets the girl.

           Google uses clips from Franklin Roosevelt’s First Inaugural Address in 1933.   Here, from its opening paragraph, is Roosevelt’s most famous sentence and the one that follows it:

So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself – nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.  In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory.

           Roosevelt got right the psychology of fear.  And, his suggestion at a collective response – which would evolve into social insurance – fit the moment.

           But no one sentient in March 1933 believed their terror ‘nameless, unreasoning, unjustified’.  Roosevelt was doing a Good Hands Gecko.  And, very well indeed.


           Eighty years later, are we in a ‘dark hour of our national life’?

           Climate change; sequestration; debt default; Medicare, Social Security and food stamps benefit cuts; unemployment; underemployment; student loan burdens:  You want fear?  It seems the one thing American society manufactures well.

           We’re not in 1933 when President Roosevelt closed every bank in the country for a week to assert control over the money supply.  Our problems are fixable.  Or are they?

           Consider something Queens College Prof. Nicholas Coch said to Grist last week when asked if New York City was ready for another Hurricane Sandy:

 Americans are incapable of strategic mitigation — that is, solving the problem, versus fixing it over and over again.


           Nonetheless, on climate change, universal owners must continue looking at the fixes they and the companies and sovereignties in which they invest can make.  On this CERES – founded and fostered by social investors – has long taken the lead. 

           Yale Economics professor William Nordhaus has a new book, The Climate Casino:  Risk, Uncertainty & Economics for a Warming World.  It covers in detail what the fixes are and what they’ll cost.  No matter how much you think you know about climate and economics, you should buy this book.

           But you should read Nordhaus only after reading – studying, actually – another book also published by Yale University Press this year.  It’s Ohio State history professor Geoffrey Parker’s Global Crisis:  War, Climate Change & Catastrophe in the Seventeenth Century.

           Parker’s title does not overstate his proofs based on the first century of the Little Ice Age.  Parker makes concrete the consequences of not attending to Nordhaus.  There is little uncertainty about them.  They’re not pretty.

           You see, we know – let me emphasize that:  we KNOW from the historical record of the 17th century – what happens to people, countries, cultures stressed by climate change.

           Global warming will be different from the Little Ice Age:  retreating ice caps, not advancing; rising sea levels, not dropping.  But their effects on weather patterns, food supply, population movement, government stability – those will be similar and similarly unpleasant.

           Universal owners have to apply that knowledge to themselves and their investments.  Using our investments, we must push strategic remediation.  Corporate supporters of the Chamber of Commerce and ALEC must come to ask themselves, ‘What were we thinking supporting those policies?’


          Climate risk has far more dimensions than any owner or manager or insurer currently looks at.  We must redefine and expand our SRI/ESG (environmental, social and governance) criteria in light of what history tells us.  And by no means only the E criteria.  The stresses of climate change, Geoffrey Parker shows, leave little of human life or political economy unaffected.

           What companies, what institutions, are preparing for them?  What policies do they have in place? 

           Such as it is, the answer to those questions lies in Franklin Roosevelt’s source.  Four hundred and twenty years ago, as the Little Ice Age began, Francis Bacon wrote of the virtue of fortitude:

Let no man quarrel with nature and the divine providence, which hath included or ordained in every ill[4] the remedy[: fortitude]….  But it is fear and impatience that are the sergeants[5] of fortune, that arrest and subdue us to those [ills]….  So as when any of these draweth from men lamentations, outcries, excess of grief, it is not the outward enemy but the inward traitor.  Nothing is to be feared, but fear itself.  Nothing grievous, but to yield to grief.[6]

           Strength of character – fortitude – appears to be the best answer our companies, our institutions, we ourselves have to date.  It’s a necessary virtue, but not a sufficient one for our times.


           I’m speaking to a room full of people who have moved ESG issues for 45 years.  We universal owners have new risks to manage – but no insurance, no strategic remediation, to hedge them.  We are left to fortitude.

           The coming years will demand more of the leadership and the fortitude you have shown.  Prepare yourselves.  Prepare your clients.  Prepare your culture.



           1.  George Gay is FAFN’s CEO; Steve Schueth, its president.  I met them at the first SRI conference from which sprang many friendships – and nurtured real change in finance.

           2.  Heartland Financial USA, Inc. was then the Dubuque Bank & Trust.  Mel retired from Heartland in 2012 as Executive Vice President and Chief Investment Office, then joining FAFN as its Chief Economist.

           3.  Actually, Randy – now at MSCI as head of ESG sales in North America – caused me to recast this talk in its entirety.

           4.  ‘Ill’ was used to include all misfortunes including, but not especially,  sickness.

           5.  ‘Sergeants’ are best thought of, anachronistically, as police officers.

          6.  Francis Bacon, ‘Of Tribute; or, giving that which is due (The praise of Fortitude)’ [1592] in Francis Bacon: The Major Works (Oxford:  Oxford World’s Classics, 2002), pp. 22, 26.

Corrections 1 Nov. 2013:  Footnote 6 restored; Footnote 1 corrected.