Duncan Austin has a new article in Responsible Investor entitled “Should ESG view sustainability as a quicksand problem?”. You can read the piece here.
Paradoxes like this – ‘the solution is the problem’ – tend to be resisted by the human psyche. A metaphor might help. Our sustainability problem resembles the quicksand dilemma of old adventure movies. The hero falls into quicksand and must quickly escape or else drown, but every move he makes to escape only drags him further down.
Ecological sustainability is a quicksand problem.
Such ‘double bind’ problems repeat throughout the natural and social world. Within the private sector, they may be most familiar to those who have managed debt relationships near covenant thresholds. In such circumstances, the lender may fall into the trap that they can only avoid breaching covenants by taking on more debt, typically at worse terms. But this ‘solution’ only worsens the problem, bringing the lender ever closer to an irrecoverable debt spiral.
In a way, it is a small pity that the ESG movement originated as an equity movement, because it is debt investors and their counterparties who likely have the better intuition for our predicament. For example, corporate treasurers who, in real time, manage cash liquidity levels and debt coverage ratios against pre-established covenants, will have an instinctive feel for our ecological problem of fundamentally the same form.
