Lynn Forester de Rothschild: ‘Investors should engage more, not divest’

British-American businesswoman Lynn Forester de Rothschild, as the founder of the Council for Inclusive Capitalism, has been working with a +350-member community of the world's top CEOs for a more sustainable form of capitalism since 2020.

The group includes a range of asset owners, pension funds as well as some of the biggest corporate household names, such as Paypal, Bank of America and Salesforce.

In March, Forester de Rothschild hosted the Council's first-ever meeting, which took place at Lambeth Palace in London and was attended by about 30 global CEOs of corporates and investors to discuss the ongoing and future commitments to furthering sustainability and net zero principles.

Following this kickoff event, Net Zero Investor sat down with Forester de Rothschild, who is also the founder of San Francisco-based Inclusive Capital Partners.

In this exclusive interview, the member of the world-famous banking dynasty shares her take on asset owners' role in driving the net zero agenda and highlights the importance and impact of active stewardship and engagement efforts.

You are at the heart of the global sustainability debate. What are some of the biggest challenges asset owners and investors face when it comes to net zero?

One of the biggest challenges facing investors and many business leaders around the world is the debate around divestment versus engagement and the role of investors and fossil fuel companies in supporting energy security and affordability while pursuing the fastest practical move to clean energy. We must do more to advocate for engagement, not divestment, as an effective investor strategy when it comes to the energy transition. 

To achieve a just transition, the world must also solve for affordable and secure energy today while also investing in lower-emission sources and scaling renewable sources for the future. Companies already invested in today’s energy system have the infrastructure, skills, distribution and relationships to scale up the energy system of tomorrow. Dismantling the current system for energy production before building the new will threaten a just and stable transition.

Do you feel, among asset owners and investors, that there is somewhat of a unified approach when it comes to net zero, for example in oil, gas and coal investments?

Companies and their assets are all different, which means they will have different strategies and plans that are unique to their business model to get to net zero. What’s important is that investors and companies are having the hard net zero conversations, that they are committed to finding their path to net zero, and that they are committed to both the moral and market imperative to do it. 

You bring together major captains of industry, ranging from asset owners to banks to corporates. How do you come to a common point of view and apply pressure to get your message across?

The Council for Inclusive Capitalism’s membership includes nearly 450 companies across all industries and from regions around the world. We first recognize and respect that there’s no silver bullet for companies to adopt inclusive and sustainable operations – it will look different for each company. We also accept that not everyone will be perfect 100% of the time or find the same solutions to our common problems.

So how does that work in practice?

Well, we engage as a membership in ways we can learn from each other. That’s why our members must make commitments – more than 700 to date – all of which are listed publicly on our website. We map our members’ commitments to action against existing frameworks for change, including the World Economic Forum International Business Council’s pillars for sustainable value creation — People, Planet, Principles of Governance, and Prosperity — and the United Nations’ Sustainable Development Goals (SDGs). This transparency is key to being able to learn from the actions we are all taking and the goals we are setting, creating a race-to-the-top.

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I was inspired to launch this organization by Pope Francis’ public appeal to business leaders to respond concretely to the issues of our day. In 2016 he stated, “[w]hat is required now is not a new social compact in the abstract, but concrete ideas and decisive action which will benefit all people and which will begin to respond to the pressing issues of our day." Our work is grounded in the moral and market imperative to pursue profit in ways that lead to a more inclusive and sustainable economy.

To what extent do you encourage your members to engage with their companies to shape their green policies?

Part of our mission is to enable collective action where we can create timely, market-moving reforms. One way we have done this recently is through the creation of our Just Transition Framework for Company Action, the first guide for the private and public sectors on areas of action companies can take to advance both environmental and social goals in the transition to clean energy.​

Developed with social and science representatives alongside private sector leaders, the Framework maps to market indicators and is being used by investors and public sector bodies to guide, recognize and reward companies taking action.​ Since launching at COP26, the Council has presented this framework at global fora over the past two years, and we have watched the work grow with new commitments from members like Suntory, PayPal, IBM, and more.

You recently brought about 20-30 CEOs together. Do they all feel the heat from their shareholders when it comes to ESG?

In many ways, our current period of global uncertainty only makes sustainability more important than ever as a determinant of our economic and social future. Our members of the Council for Inclusive Capitalism are more committed than ever, bringing the need for sustained focus on sustainability and inclusivity to the forefront of our discussions. Good business has always been about companies profitably evolving to address market demand and meet public need. Companies are committed to sustainability because it is not only the right thing to do, but the right business thing to do.

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