Unlocking the “S” in capitalism This is where the concept of inclusive capitalism is gaining steam as part of a more inclusive approach to economic growth. Consider the World Economic Forum’s (WEF) recently Social insecurity launched Inclusive Growth Framework. In its 2020 Davos manifesto, the WEF upgraded the purpose of a company Before the pandemic, informal employment to encompass all its stakeholders – employees, customers, represented 60% of global employment. This suppliers, local communities and society at large – in shared means that 2 billion people worldwide worked 9 and sustained value creation. in jobs characterised by lack of basic protection, 10 Furthermore, over 190 countries have adopted the UN including social protection coverage. Sustainable Development Goals (SDGs) to support a better and more sustainable future for all. By highlighting priorities such as “zero poverty”, “decent work and economic growth” and “quality education”, the 17 SDGs provide a roadmap for companies to address these issues in the way they run acknowledging “the need to ensure that no one is left behind 11 their organisations and through their products and services. in the transition to net zero economies”. And this is a two- With its focus on reflecting the needs of women, youth and way interdependence, as human capital has to be “unlocked” local and marginalised communities in climate-related to secure the skills necessary for climate transition. planning, SDG 13: Climate Action is particularly germane Clearly, the SDGs can provide a much-needed roadmap to to this discussion of inclusive capitalism. SDG 13 highlights address some of the world’s most pressing issues related how the journeys towards both an inclusive world and a to sustainability. Early results are promising: of the 8,550 1.5 degree-aligned world are tightly interwoven. Consider companies in the MSCI All Country World Index, nearly how moving to a low-carbon economy can have social 40% have aligned with multiple SDGs (see Exhibit 3). Of repercussions, for instance if jobs are jeopardised by the those companies, SDG 5: Gender Equality was among the shift away from fossil fuels. This is the impetus behind the top ranked in terms of alignment. But other companies still calls for a “just transition”. At COP26 in November 2021, have work to do: 7% of firms were assessed as “misaligned”, 12 more than 30 nations signed the Just Transition Declaration noticeably on SDG 7: Affordable and Clean Energy. Exhibit 3: companies are grappling with sustainability Level of corporate alignment with SDGs 8,550 Companies .% Most aligned – No strongly misaligned assessments on an SDGs – At least 3 SDGs identified as strongly aligned .% – Higher overall number of aligined SDGs than misaligned .% Aligned – No strongly misaligned assessments on an SDGs – Higher overall number of aligined SDGs than misaligned Neutral or mixed Misaligned – At least one SDG is assessed as strongly misaligned .% – Higher overall number of misaligined SDGs than aligned .% Misaligned – Three or more SDGs assessed as strongly misaligned – Higher overall number of misaligined SDGs than aligned This chart displays distribution of companies’ assessment by SDG for a set of 8,550 companies, as at 11 August, 2020 Source: MSCI ESG Research LLC. Data as at August 2020. 9. WEF Briefing Paper: Shaping an Equitable, Inclusive and Sustainable Recovery 10. The Sustainable Development Goals (SDGs), 2021 | United Nations 11. Supporting the Conditions for a Just Transition Internationally - UN Climate Change Conference (COP26) at the SEC – Glasgow 2021 (ukcop26.org) 12. Assessing Company Alignment with UN SDGs - MSCI 4