Speech to the Boston Economic Club, Federal Reserve Bank of Boston.
June 15, 2010

My remarks tonight are set against the twin backdrops of the Financial Crisis and what I will call the Sustainability Crisis-twin crises that should challenge our thinking about investing, certainly, but also about economics more broadly, as they betray deep-seated, systemic problems that neither government nor markets, the public sector or the private sector, as they are presently constituted, seem designed to address.

We need a new design. We need to take this moment in time to imagine what the Next Economy might look like-an economy that is both post-Sustainability Crisis and post-Financial Crisis.

It seems clear to me, first of all, that over the next few decades, market capitalism will need to undergo a Sustainability Revolution equal in significance to the Industrial Revolution that ushered in the modern period. In order for this to happen, corporate behavior, market behavior and investor behavior will need to change. In each case, they will need to become more sustainable-which means, among other things, to behave in a way that focuses more on the long term.

Investors can play an important role in this great transformation, as well they should: the transition from an industrial age economy powered by coal and oil to a sustainable economy powered by clean energy and new technologies will unleash a new era of economic and investment opportunities.  Sustainable Investing, as I am using the term, is not only a strategy to hasten this historic transformation, but also to harvest the potential investment returns associated with it.

Climate change may be the most urgent and potentially calamitous challenge before us, but it is only one aspect of a much larger Sustainability Crisis confronting humanity in the early decades of the 21st Century. Simply put, the vast stock of natural capital on which human life depends- air, water, minerals, oil, fisheries, forests and rainforests, grasslands, savannas, wetlands, estuaries, oceans, coral reefs-is deteriorating at an unprecedented rate. In the past fifty years, the world has lost a fourth of its topsoil and a third of its forest cover. In the last thirty years alone, one-third of the planet's resources-the earth's "natural" wealth-have been consumed. We are losing freshwater ecosystems at the rate of 6 percent per year, marine ecosystems at the rate of 4 percent per year, and at present rates of destruction we will lose 70% of the world's coral reefs in our lifetime, host to 25 percent of all marine life. The world is fast approaching or has already crossed the sustainable yield thresholds of many natural systems.


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