Blog

25
Aug

Towards Expanding Our Vision

Yearend 2019 marked 25 years the Global LAMP Index® has been in existence. It started in 1995 as a learning lab to test an emerging new life-mimicking theory of corporate management that was radically different from the traditional industrial model. By placing a higher value on living assets (people and Nature) than on non-living capital assets, it reversed long-standing management practices. Because living assets are the source of capital assets, this seemed logical; but it contravened long-standing tradition, which meant it was then (and remains now) out of mainstream management thinking.

From inception, the Global LAMP Index® included 60 companies – double the size of the Dow Jones Industrial Index. It was designed to select companies with best living asset stewardship (LAS) practices in a variety of industries that replicated the sector diversity of the Morgan Stanley Capital International (MSCI) World Index. This was done to ensure that future performance comparisons between the LAMP60 and other international indices would be  level and fair. Importantly, because the LAMP60 was conceived as a learning lab, there was virtually no turnover in the Index. Over the past 25 years only 6 of the original companies were replaced – usually as a result of mergers and acquisitions. Such stability enabled us to see whether the original LAS leaders remained leaders (most did) and how they adapted to a changing world.

To test the validity of this approach, Northfield Information Services, a globally renowned investment consultancy, did a series of tests on the LAMP60 to determine its correlation (R-squared), tracking error and relative return on investment (alpha) versus various benchmark indices. In all such tests, Northfield determined that the LAMP60 had positive alpha while being highly correlated with its benchmarks. In addition to the MSCI World Index, these benchmarks included the Financial Times Stock Exchange (FTSE) World Index and the S&P Global 100 Index. The following table shows relative results for the LAMP60 and Focus Group – a subset of the LAMP60 that represents the “best of the best” – over the past 25 years.

Due to the effects of compounding, the the LAMP60 and Focus Group substantially outperformed their benchmark indices over the past 25 years. Although the advantages of the LAMP60 fell off slightly as the Index aged, its results show that this 25 year old learning lab of LAS exemplars still had a lot of life.

Time to Move On

Having proved over 25 years the effectiveness of the living asset stewardship (LAS) approach to corporate management, the Global LAMP Index® will discontinue as a learning lab. For researchers and investors interested in global companies that best model this approach today, we suggest following the “Global 100” – an annually updated list of the world’s 100 most sustainable companies produced by Toronto-based Corporate Knights Magazine (https://www.corporateknights.com/reports/2019-global-100/2019-global-100-results-15481153/). Presented each year at the annual meeting of the World Economic Forum, the Global 100 is more current than a 25-year-old learning lab could ever be.

Although companies on the original LAMP60 learning lab often appear on the Global 100 list, the attributes of LAS leadership have evolved so that many companies in the original learning lab, good as they are, no longer lead in the field of best practices.

Most notably, the geography of such leadership has shifted as certain countries and regions have become more proactive in their political-economic policies. This is particularly evident in the Nordic region. Although containing less than half of one percent of the world’s population, 15 Nordic companies were included in the January 2020 list of the Global 100, including the top 3 companies on the list. This is a noteworthy development.

Regions that were under-represented in the original LAMP60 learning lab (emerging Asia, Latin America) are now regularly included in the Global 100. This is a wonderful development and should be noted as world economic conditions change.

Economies That Mimic Life

The political-economies in which companies operate are today increasingly important to sustainability outcomes. Corporate LAS leaders, important as they are, cannot be the primary front-runners in the global quest to reduce the catastrophic ecological footprints and adverse social outcomes of mainstream political-economic strategies.

To address this need, I have written a new book, titled Economies That Mimic Life, that looks deeply into the life-mimicking Nordic Model in contrast to the dominant neoclassical/industrial model that is presently self-destructing in a vortex of climate change, ecosystem destruction, social divisiveness and compounding debt.

Conversely, countries operating under the Nordic Model today have the world’s highest living standards, which they achieve with low sovereign debt ratios and declining ecological footprints. Nordic countries also have some of the world’s most advanced public health systems and highest average life expectancies. In keeping with this record, they are today global exemplars in managing the coronavirus pandemic.

One of the most important elements of the Nordic life-mimicking system is the region’s high standing in annual surveys on democracy, inclusiveness, freedom of speech, rule of law and public trust. These qualities reduce the economic burdens of corruption and misallocation of resources – particularly excessive dependence on fossil fuels.

Building on the region’s spirit of trust, Nordic countries network and collaborate toward shared  visions of the future and goals. Prominent examples include: the Nordic Bioeconomy Initiative; the Nordic Council of Ministers’ working groups on biodiversity and renewable energy; and the region’s 2030 Sustainable Development Goals (SDGs). Because of these initiatives, Nordic countries have become world leaders in renewable energy innovation and circular economy practices that reduce waste and conserve natural resources. All of which makes their economies more productive and resilient.

Looking forward, it’s important to note that the life-mimicking model is a pathway rather than a destination. Instead of assuming that all economic activity can be explained and managed according to fixed set of laws, it assumes that human and natural life are continually in flux as social and ecological conditions change. Consequently, there is no immutable (mechanistic) way forward. To survive and thrive in this changing world, we must learn as we go by hearing what systems tells us through myriad feedback loops. Therefore, rather than ignoring or minimizing events such as climate change, Nordic countries proactively address them.

Because life-mimicking models are dynamic, we can only understand them in a general way.

As the great systems thinker Donella Meadows said: “We can never fully understand our world, not in the way our reductionistic science has led us to expect … Systems can’t be controlled, but they can be designed and redesigned. We can’t surge forward with certainty into a world of no surprises, but we can expect surprises and learn from them and even profit from them. We can’t impose our will upon a system. We can listen to what the system tells us, and discover how its properties and our values can work together to bring forth something much better than could ever be produced by our will alone.”

This is what life-mimicking economies do. My book, Companies That Mimic Life, explains the process as it has evolved so far in the Nordic countries of Denmark, Finland, Sweden, Norway and Iceland. Although they are the gold standard in implementing this model of political-economy, they aren’t alone. Other countries have adopted important elements of the model as readers of my book will discover.

Because of dynamic attributes of the life-mimicking model, I have decided to make this website a collaborative venue with more current narratives on the model – both as it is today and as it is becoming. While the Global LAMP Index® has proved the value of living asset stewardship as a corporate strategy, it is too limited to effect the political-economic changes our world so desperately needs. To expand into this important field of strategic thinking, I have joined with others to make this website a more collaborative venture. Perhaps a non-profit?

— Joseph H. (Jay) Bragdon











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