Serial Entrepreneur. Digital Award Winner, Mentor, Board Advisor, Founder and CEO of LookStyler, a global marketplace for fashion tourism.
While the concept of free-market capitalism dates to the 18th century when Adam Smith published his pioneering book The Wealth of Nations, the concept of conscious capitalism is much younger. Smith’s theories are the backbone of today’s free-market economy, but the world has rapidly changed and evolved. A decade ago, Raj Sisodia and Whole Foods Cofounder 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 looks beyond the ideology of profit maximization by building enterprises that are creative and innovative and that generate and multiply both social good and personal development. Conscious businesses generate prosperity for the whole community by incorporating diversity, inclusion, wellness and human rights into their core activities.
After being in the technology space for 10 years, I’m now working on building a fractional investment fund for real estate, private equity and startups that democratizes investments and uses artificial intelligence. In my opinion, the businesses—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 company was acquired by Amazon for $13.7 billion, which to me is proof that conscious companies can be highly 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 connected to an investor’s moral, social and environmental values and inclusionary investment decisions can bring about wide-reaching positive changes. In recent years, there has been a rise in ethical investing. In 2021, Bloomberg Intelligence reported that ESG assets are on track to exceed $53 trillion by 2025.
Moral investing is important because funding ethical businesses can amplify the effects those companies create in society. I believe morally flawed leaders can cause more damage when given access to capital, as they might serve their own interests, while ethical leaders, on the other hand, ensure their businesses not only generate profits but also bring benefits to society at large. In my opinion, ESG standards should be at the forefront of each regulatory decision-making policy.
ESG investments can bring numerous environmental, social, economic and cultural benefits. Long-term sustainability requires cultural inclusion, gender-based diversification and ethical behavior. From my perspective, these are some of the standards that could increase future investment yields.
I believe we would benefit from having an official ESG ranking for every big investment fund and corporation. Scoring could cause certain difficulties, as we still lack tangible market benchmarks and standards. However, I believe machine learning and AI tools could help facilitate this implementation.
How Investors Can Adapt
The world of venture capital and private equity investments has lacked diversity for years. As investors often say, the core of every smart investment decision lies in diversification. That is precisely what I believe 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 confined to investors who keep investing in the same type of businesses and the same type of entrepreneurs.
In my opinion, investments should be as diverse as society is. Investors could thus become more ethical by reflecting on societal benefits first, considering the impact of their decisions, engaging with more diverse stakeholders, holding companies accountable and raising the bar for themselves and their closer environment.
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 would track performance would probably also contribute to more conscious investments being made. If more investment funds offered the possibility of fractional ownership, perhaps this would increase the liability as well.
The Future
Generative AI, a form of AI that creates content in response to user prompts, has already brought a profound impact on the world of investments and finance. AI tools can be used for making decisions and more informed predictions, and they can improve data screening and data processing. Many financial analysts see their jobs changing rapidly, as AI can analyze the market, highlight investment opportunities and process data quickly. I believe AI will create new job opportunities, particularly for AI administrators who will have to efficiently manage AI tools.
From my perspective, ethical investment tools could be used for giving top scores to investment funds that have the most diverse portfolios. Screening investment processes that are now mostly obscure could become more transparent with the help of ethical AI tools. Increased speed and efficiency in investments could become coupled with a more human approach to investments. Ethical AI is needed because using this technology responsibly can help avoid biases based on race, gender and nationality. Using AI for ethical and fair investment screening could thus help provide more equitable access and equal treatment for entrepreneurs.
We live in critical times, where rapid technological advancement could create a larger wealth gap. Fair investments are important, as I believe they can serve as leverage to a fairer society. As Einstein is known to have put it: “The most important human endeavor is the striving for morality in our actions.” Morality in investments is the next thing to strive for.
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