Less is more, or how to finance the regenerative economy

The evidence is so overwhelming that it is now widely accepted. Hardly anyone doubts that the Earth is being ruined because of over-consumption, waste (less than 10% of natural resources are recycled), various kinds of pollution, the disruption of natural cycles, and ocean acidification. Six of the nine “planetary boundaries” identified by the Stockholm Resilience Centre in 2009 have now been crossed.

The sense of urgency is no longer dictated solely by the ticking of the climate clock (*); what’s needed now is to reduce the pressure on the environment on all fronts while strengthening economic and social inclusion. This is the ambition of the regenerative economy, which proposes to move beyond the notions of sustainability and durability and replace them with the concept of having a positive impact on our planet.

What are the principles on which the regenerative economy is based? This new mode of production for goods and services features lower consumption of resources through greater restraint and efficiency (particularly as regards energy), as well as products with a longer service life, recycling waste material, and repairing and renovating goods. Less is more – the aphorism coined by the famous German minimalist architect Mies van der Rohe – would make a good motto for the regenerative economy.

So how can this ecological imperative be translated into investments? Numerous environmental specialists within the Pictet AM teams seek to answer this very question, and they in turn have been calling on acknowledged experts in the academic sphere.

Meanwhile, the investment process – carefully defined to extract value from a very specific area of activity – consists of using a fourfold screening process to select a few dozen companies out of a global investment universe of some 40,000 listed companies. The 600 or so issuers left after the first three ^filters (low environmental footprint; positive contribution to regeneration; best in class for regeneration) are then subjected to a fundamental analysis in which their business model accounts for 30% of the score, management quality for 20%, and financial and stock market criteria for the remainder.

(*) “Le Tic-tac de l’horloge climatique” [“The Ticking of the Climate Clock”], published in 2019 by Christian de Perthuis, founder of the chair in Climate Economics at Paris Dauphine University (Paris)?