Is sustainability a short- or a long term-concept for investors?
Both. From a long-term perspective, of course, it is important to be sustainable and to include all the variables of ESG. But already companies are facing pressure, from consumers, even from regulators.
For instance, here in Britain, Mark Carney [former Governor of the Bank of England] mentioned the need for all companies in the financial sector to have their plans ready now—not in a few years’ time, but now.
Corporate tax is another urgent and rising conversation for business leaders. Some say richer people should pay more tax, others will argue the exact opposite. Who do you side with?
This decision needs to be taken at the national level according to the priorities of the country. I don’t have a kind of a religion on that matter. A country’s success doesn’t seem determined by its tax rates. Of course, generally speaking, business communities prefer lower corporate tax.
Honestly, I’m instinctively in favor of lower rather than higher taxes. I believe that in some of our societies, the state takes too much of the product of work of those citizens, so I am for a more efficient state than we have in many of our societies. Having said that, each country’s priorities and needs are different.
When presiding over the European Commission, did you see this conversation coming?
Let me say with some pride that it was my Commission that put forward at that time the most ambitious program [Europe 2020] to fight climate change and reduce greenhouse gases by 2020. The EU in fact has been leading efforts on climate change. So, yes—we have seen the need to act more responsibly for a more sustainable growth. To be frank, there was not the same level of urgency as we feel now on the issue of impact investment before the financial crisis, as we have today. I think that the financial crisis, at least in Europe, but I believe also in other parts of the world, has created, from a political and social point of view, a much more acute perception of the unfairness of the growing inequalities.
And we need to address inequality—perhaps more than ever—if we want to avoid extremist alternatives coming either from the far left or the far right. We have seen, in some of our more advanced democracies and market economies, the rise of nationalist, populist and protectionist trends, sometimes even xenophobic forces. This is largely the result of the perception that there is a growing inequality.
Some argue that capitalism is rigged. Yet we have never seen so many democratic societies.
Yes, but to be fair, I think there’s no longer the illusion that was there after the war that democracy or market economy would be inevitably the end of history. Today, we have some systems that try to present an alternative, including systems that were totalitarian once.
They argue that such approaches avoid the divisive and polarized nature of democracies, at least some of the more competitive democracies. I don’t agree with that. I think that over the long-term democracies are certainly more sustainable and stable than authoritarian regimes, but we must be attentive to the fact that on the so-called political market, democracy is not the only offer. And market economy is also not the only offer. So, we have to legitimize our choices with results—otherwise more extreme options seem viable.
What’s next for capitalism?
I still think capitalism—although I prefer to stick to the designation of market economy systems because capitalism has already a kind of an ideologically biased connotation—has the brightest future of any of the options out there. It’s the most compatible with human nature.
People want to take their decisions freely about what they consume, about what they buy and sell, what kind investments they can make and to which goals they can aspire. That is basically an idea of freedom that is critical, together with peace and human dignity. Other systems, sometimes born with good intentions, in fact have not been able to ensure freedom.
Our societies have evolved, and there are more subjective interests to factor in. Still, market economies remain the more sustainable system over a long period of time. But we have to face the fact that there is a serious social and political backlash. Capitalism has to transform and adapt to new conditions if it going to continue to be the most successful economic system we’ve created.
Alexandra Abreu Loureiro is a Partner based in London. She leads Brunswick’s senior advisory in Portugal and the Portuguese-speaking world. She was an award-winning TV broadcaster and former spokesperson for the Ministry of Defence of Portugal, and is fluent in five languages.