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Mosaic Conversations: Pavan Sukhdev on the Nature of Value and the Future of Corporations

This post is part of a series of conversations with leaders and innovators who are working to reinvent the global economy and energy system. 

Pavan Sukhdev is the founder and author of Corporation 2020, a campaign and forthcoming book that show how corporations and society can work together to achieve common goals and build a green economy. Previously, he was the 2011 McCluskey Fellow at Yale University and head of the United Nation Environment Programme’s Green Economy Initiative. He was also Study Leader for the G8+5 commissioned report on The Economics of Ecosystems and Biodiversity, which sized global biodiversity loss and ecosystem degradation in terms of its impact on human welfare and economics. Sukhdev has also had a career as a banker, working for 17 years for Deutsche Bank, where he founded and chaired the Global Markets Centre, Mumbai.

I recently had the chance to talk with Pavan about his work and how, as an international banker turned environmental economist and changemaker, he invests his own money.

The first question is what were you doing at Deutsche Bank and how did you get into your current line of work? You’re on a sabbatical now?

I actually left Deutsche Bank in February of last year. I was in financial markets for 17 years, as a manager, trader, sales person, structurer, and so on. I’ve done a bit of everything on the financial markets side, largely in the space of debt and currency markets, though I did run the overall Global Markets business in India, which included equities. Since 2000, I’d been a Managing Director at Deutsche Bank, so when I left them last year I’d already done ten years as a Managing Director.

So it pretty much sounds like a typical, boring financial markets / investment banking career! But, at the same time, I always had this other life, which was my hobby, and that was environmental economics. I just couldn’t get it out of my head, how wrong we were in the way we assessed the value of nature, or indeed the nature of value.

In the late 1990s, I was obsessed with misrepresentation at the national level. India was just beginning to get on the same GDP bandwagon that China had been on for a few years, and there was a lot of excitement of, oh, we can be another China. We’ve just got to have 8% or 10% GDP growth and it’ll all be okay! I could see that that just wouldn’t work. What you do is create huge footprints on local ecology, on the environment, and you create equally huge footprints on the livelihoods of the poor.

I could see that we were going to make the same old mistakes that China has, and we don’t have the same agility that China has. You see, China has a bit of a totalitarian regime. So today the fact the world’s largest reforestation project is in northern China, in the Loess plateau, tells you that the Chinese can actually fix environmental problems when they get their heads around them.

In India, you need consensus. And it takes forever. Everything takes forever. I could see that if we fell into the same environmental trap as China, we would not be the proverbial “elephant that turns on a dime” and gets himself out of the problem. We are too much of a democracy. We were going to be completely ruined.

So that was the first thing I did. I set myself to proving economically what I knew intuitively. I said I have to get my country a system of Green Accounts, and started the “Green Accounting for Indian States Project” (GAISP, a project of my NGO “GIST” – see ). That later led to my work with the U.N. on The Economics of Ecosystems and Biodiversity report (or “TEEB” – see

I love that line about the value of nature and the nature of value. I know a lot about your work on the value of nature, but I’m intrigued with this question of the nature of value.

Yes, there’s a lot of work being done to value nature, but thinking about the nature of value is also pretty important when we are looking at anything like developing a functioning green economy. We are all so steeped in a world that’s driven by markets and prices that we forget that value is not the same as price. Valuation is a human institution. And valuation can be done by a society without any reference to economics at all. I’ll give you an example. There are tribal communities who will consider a certain grove or a mountain sacred, and they will defend that sacred space, with their lives. So therefore they have valued something at infinity without any reference to economics at all.

Or look at Yosemite National Park. There weren’t ecological economists when it was created, people saying this is the value of this or that  ecosystem service, so please conserve this valley. They just said, this is a wonderful place, its our heritage. I want it to be here for my grandchildren.

This is the thing about the nature of value. People today are so fixated on our dominant economic mode which is basically a ‘market’ model, a private wealth model that ignores public wealth. It’s a model that looks at traded goods and services but not those that are not traded. It ignores the aspects of wealth that are in the public domain, and is blind to value that doesn’t  get produced in factories and offices, such as the benefits of natural ecosystems or of human communities .

And yet we know that without these benefits  we can’t survive. We know that without the benefits of community, our lives are empty. We know, even if it’s not bought or sold, that a river or a forest provides value to our society and economy. We know all that, and yet we choose to look at only one indicator, which is price, which is something that is transacted in a market and has a dollar sign attached to it.

At Mosaic, we’re building a solar marketplace, and we’re designing project pages where people will look at the different projects. We’ve had very interesting conversations about how to display the different metrics for what a project produces. There are the usual financial metrics, but also metrics for job creation and clean energy created and other things we can quantify. We’re very eager to see what that does. How much do those other impacts matter to people? Which impacts matter most to people? I think we’re going to learn a lot about value.

Oh definitely. You know, people like to use jargon like “multi-criterion analysis.” I smile when I hear that. That’s the job of every politician. Every leader has to think in terms of different kinds of value—value that goes well beyond what you can price in a monetary sense. They’re trying to maximize employment, community well being. Any politician who is worth his salt is doing these things in his head and in his heart and convincing his constituents that he’s capable of doing it. Otherwise why would he be a leader?

We get so fixated by the reigning deity of our times, which is the market, that we just forget that there are other ways of recognizing value, or of demonstrating value.

Your new project, Corporation 2020, sets corporations up as agents of change. Why is that where you chose to focus?

Well, it’s not that Corporation 2020 ignores governments or other institutions. But you’re right about where Corporation 2020 defines the level at which change has to be implemented. Whether we like it or not, we’ve created a social architecture in which the corporation, as an artificial being, has all the rights of an individual, other than voting, and almost none of the responsibility. That artificial being has grown to be the most important institution of our times :  it comprises two thirds of the global economy and employment. So the corporation is the place where change has to happen, because it’s so significant a part of our economy, our existence…

But it’s not as if the change that is required can only be doneby the corporation. In fact my team and I argue in the book Corporation 2020 that most of the changes that need to happen are exogenous changes, changes from the outside.

We know that endogenous change is possible and we applaud it when we see it. For example, we’ve got Jochen Zeitz at Puma leading the charge in creating the world’s first “Environmental P&L” and improving that company’s environmental performance. Great leadership.

But my point is: even if you take the CEO’s of Puma (PPRGroup) and Unilever and Virgin and and Walmart,  who all  realize the scale of our  challenge and are committed to doing something about it —you still only come to something like 2% of global GDP. All these leaders combined are still too small of a change, and that’s where the issue arises.

So we need to look wider : can we change the operating environment of corporations? What about resource taxation and speaking with taxation authorities? And to finance ministries and central banks, about limits on leverage for companies? What about responsible advertising, and rules for that?

We’ve got great leadership, but what we need is great followership. And in order to get every corporation to follow along in the path of the corporations that are leading, we need policy changes,  institutional changes. That’s really where the cookie crumbles.

I’ve been asking a lot of my friends, people who I think are smart, how they invest their money. Would you mind sharing your strategy?

Well, my approach is relatively light on equities. I have less than 10% in equities anywhere. And most of those have an SRI frame. So they are businesses in the environment or green funds, ethical funds,  and so on.

The largest part of my portfolio is partly in cash and partly in fixed income securities in emerging markets. I have thought for a long time that developed market risk is understated and emerging markets risk is overstated. So generally speaking, I’m long emerging markets bonds. Cash and fixed income securities are about 30-35% of my portfolio.

The emerging market bonds are mainly government bonds. I’m relatively conservative as an investor. Even with emerging market countries, I never keep more than a tenth of my total emerging market bond portfolio in any one country. My average maturity on those is about 10 years, with yields  in the range of 5%-8%  from country to country. .

The remainder of the portfolio is basically properties. Land in Australia which I love and where I do my reforestation and personal carbon offsets. Land in the south of India where I am trying out an experimental ecotourism and organic farming project. Then I have various flats  – homes in London and New York. I think 40% of my portfolio is basically property.

Some of these  investments  are, well, let’s say they’re not normal! You might wonder why would an investment banker be doing reforestation in Australia? But I wasn’t thinking that way, as just an investment banker. I was thinking slightly larger and longer….

Watch Pavan Sukhdev Introduce Corporation 2020 

Learn More 

Corporation 2020
The Economics of Ecosystems and Biodiversity
Pavan Sukhdev’s NGO, GIST Advisory
Pavan Sukhdev’s Personal Website