A decade in need of a course correction

In January 2020 I blogged about the 2020s decade needing a purpose and I spoke about the opportunity for corporations and asset owners – two organisational types with huge symbiosis – to develop that purpose.

The idea was that the decade heralded an opportunity for these organisations to use stronger purpose to drive greater well-being and wealth into the lives of the 8 billion consumers, 3.5 billion employees, and 4 billion of savers and investors on the planet (excuse the rounding).

The enablers to achieve this were spelt out. How people and organisations respond to the pressures and incentives within the system, and how the stars need to align, notably with governments and civil society. This must involve the alignment of the ‘outer world forces’ (the condition of the world ecosystem in all features of its landscapes) with the ‘inner world forces’ (the cognitive, emotional and behavioural state we are in as individuals reflecting the groups and organisations we owe our allegiances to as members of families and communities, and as employees and consumers).

It’s January 2025 and we are halfway through the decade, how are we getting on with this decade with a purpose? The answer is that it’s a complicated picture and a mixed story but an important one to tell.

outer view: macro factors

The outer world view looks out on eight big macro factors that condition our lives and those of the enterprises around us. The mnemonic ‘STEEPLED’ is used to represent this mosaic of factors – societal, technological, economic, environmental, political, legal, ethical and demographic. As regards progress on these outer factors it’s been a chequered five years.

These below are my opinions not definitive absolutes. There is no objective way to score these, so forgive the simplified measures used, but the conclusion is reasonably clear that better world purpose and progress has had its headwinds and is suggestive of a world in trouble.

 Three of the eight should get OK marks:

– The economic progress of the world has been bumpy but OK overall.
– The legal side is stable, and on the whole fine.
– The progress of technology has been positive, although with some stresses; while technology is firing up many innovations in various key fields, the increasing speed of change is challenging humankind’s ability to adapt.

The technology stressors have contributed to lower scores below for the other factors:

– Our societal state has turned grumpier – the world happiness score for the top 20 countries has fallen from 7.3/10 to 7.1/10 amid increasing mental health problems
– The environment has warmed faster than anticipated  – global average excess temperature (over pre-industrial levels) in 2024 up to 1.57^oC from 1.23^oC five years previous; that tallies with the atmospheric carbon count still rising from 399 ppm to 425 ppm.
– The political state of the world has faced a decline in the number of liberal democracies from 22 per cent of countries to 18 per cent over five years.
– Our ethical state as a society hasn’t progressed – witness the annual number of deaths from conflicts rising from 78,000 to 154,000 in the five years.
– The demographic experience has been adverse – global population growing from 7.8 billion to 8.2 billion, and fertility rates ranging from under 1 to over 7 with the growth in all the wrong countries.

Inner forces: consciousness and culture

What about the inner forces? This looks in on human consciousness, culture and experience, both at the level of the individual and in their collective states in our ecosystem. The picture seems different between the two lenses – the collective has been stronger than the individual.

This is again a mosaic of factors with a bunch of squishy things. They map into two forces – first the smarts of clear thinking and resilient coping; second the synergy of joined-up minds and collective action.

Here, the mnemonic is ‘STIRRING’: how we have been doing with sensemaking, trust, identity, relationships, resilience, irrationalities, neuropsychology and governance. These like the outer forces are hard to measure but it adds up to a mixed picture:

• mixed forces from the smarts: resilience maybe OK (increased cautionary thinking)
• neuropsychology OK (better education helping towards smarter cognition, but mental health less rosy)
• sense-making and irrationalities not OK with social media increasingly implicated in feeding our innate dislike for inconvenient truths and like for convenient untruths
• positive forces from the synergies in governance, relationships, identity and trust, particularly in their collective form.

The irrationalities, identity and relationships all need comment.

Our irrational side has always been a survival asset making us classify new experience as part of the model we expect to see, and this is fundamental to the decision-making response to too much sensory stimuli. This produces the confirmation biases, attention deficits and overconfidence that limit our receptivity to new thinking. And this state is being exploited by vested interests. But more hopefully our cognitive processes are still maturing, and new technology can contribute to that. The investment industry has way more smarts than five years back, trust me.

Identity contains values, culture, and purpose. Values have suffered with politics super-charged by emotion and bias, the rise of individualism with its fragmentation of collective identity and the extractive, consumerist and exploitative attitudes and actions that have emerged to shape our inner world and pull on the levers of our outer world. But culture and purpose of organisations have been on the rise, witness the growth in stakeholder capitalism, the resilience of society through Covid, and the resolve of large numbers of asset owners and companies to deal with that toughest of challenges – net zero (51 per cent of asset owners, 45 per cent of corporations have net zero ambitions at the end of 2025, both up from close to zero in January 2020).

Stronger relationships are needed at the heart of the toughest challenges and the investment industry has progressed on that. Illustrations in the asset owner space come from the commitment to coalition organisations, growth in stewardship engagement, and the use of co-opetition. These elements all benefit from the power of better engagement in applying collective action to address difficult problems. In a phrase this is systems leadership.

This inner world is where the principal agency lies for transformative change. An outer world ‘in trouble’ can be helped by the inner world leaning in to positive change.

Can we expect the asset owners and corporations to do the right things in the coming years? The increasing pressure from civil society on these organisations raises my expectations that they will follow the purposeful road.

But their actions have got to count. In the ‘4-3-2-1 pin code’, the 4 units of power belong to the government, 3 to corporations, 2 to asset owners and asset managers and 1 to civil society. We need the system to coalesce – for civil society to place pressure on corporations and investors to raise their game and apply their combinatorial power to government. That would be a classic systems solution from collective intervention.

In one sense I am a bigger believer in the asset owners now than five years ago.

They seem more resolute to take a view of the system in which the returns they need can only come from a system that works. And they see work to support the system as part of their fiduciary duty. They are more clear-eyed and sure-footed than other leaders in their actions. It goes with their turf. They are taking a future-back position through thinking ahead and insightful action. Their net zero ambitions fit perfectly.

A world in trouble argues for a mid-course correction. We need these organisations, appropriately motivated and inspired by purpose-driven individuals, to help steer the world and their stakeholders to a better place. This is too important a mission for them to fail.

Roger Urwin is global head of investment content at WTW.