Oliver Balch interviews the financier leading the Coalition for Inclusive Capitalism, which has partnered with the Vatican in its drive to reform markets and companies to meet the unprecedented social and environmental challenges ahead

“Listen to the cry of the Earth and the cry of the poor.” Five years on from Pope Francis’s call for mankind to take heed of the climate crisis and care for our “common home”, his message has landed in the highest echelons of global capitalism.

Last week, a group of 27 titans of global business representing the Council for Inclusive Capitalism inked a partnership with the Vatican and pledged to help build a fairer and “more trustworthy” economic system, a year after travelling to meet the Pope in Rome last November (see main photo).

In a virtual address to these self-styled “guardians of inclusive capitalism” – among them COP26 special envoy for finance Mark Carney, and the CEOs of Salesforce, Johnson & Johnson, Mastercard, BP, Visa, State Street, Bank of America, as well as State of California treasurer Fiona Ma and OECD secretary-general Angel Gurría – Pope Francis urged them to make capitalism an “instrument for integral human wellbeing”.

Basically, I was a money-is-good, neo-liberal person who believed in the sanctity and sanity of free markets

Three years in the making, this epochal virtual event was the work of an individual who, until a decade ago, described herself as an ardent free-market capitalist.

After all, as systems go, it worked well for Lady Lynn Forester de Rothschild. A successful corporate lawyer turned even more successful entrepreneur, American-born de Rothschild (the honorific derives from her husband, the British financier Sir Evelyn Robert de Rothschild) rose to prominence during the early telecoms boom of the 1980s and 1990s. Successful exits from various startup ventures made her a millionaire many times over.

“Basically, I was a money-is-good, neo-liberal person who believed in the sanctity and sanity of free markets. A rising tide lifts all boats, and all that,” she says.

Today, this same disciple of the Wall St school of unfettered capitalism is to be found standing shoulder to shoulder with the Pope, leading her corporate colleagues up the aisle of inclusive capitalism. So, what happened?


For an answer, it’s necessary to wind back the clock to the financial crisis of 2007/2008. Appalled by the sub-prime mortgage fiasco and its implications for the 99% who operated outside the corridors of corporate powers, she found her convictions unexpectedly challenged.

Capitalism might cause some boats to rise, the crisis revealed, but not all by any means. Could it be fair that monster tankers plied the high seas, while dinghies languished in the shallows? So, when the Occupy movement appeared a short while later, railing against the “1%”, she listened.

For a Rothschild, a name intrinsically linked to international banking, that’s no small step. At the time, she was chief executive of EL Rothschild, a private investment house set up by her and her husband (‘E’ for Evelyn; ‘L’ for Lynn). The firm’s portfolio includes The Economist Newspaper Ltd, among other prize assets.

“My two sons were leaving university at the time and I just became shocked by the prospects facing them and other young people their age compared to the prospects I had when leaving law school back in the early 1980s,” she said.

Benchmarking and the whole idea of a ‘race to the top’ are really important, but I think they are hindered until there are standardised

At global consulting firm McKinsey, the then chief-executive, Dominic Barton, shared her concerns. The pair convened a taskforce of leading thinkers from business, policymaking, and academia with a two-fold objective: to determine where capitalism had gone wrong, and to ask how businesses might help put it right.

The taskforce’s final report in 2012, Towards a More Inclusive Form of Capitalism, defines the term as a system in which “everyone ‒ all stakeholders, not just shareholders ‒ derive benefits from business” ‒ in line with contemporary interpretations of stakeholder capitalism.

She went on to set up the Coalition for Inclusive Capitalism, an interdisciplinary network of leaders that endeavours to advance the case for “broad and sustainable prosperity”. Out of this came the Embankment Project, which, with considerable input from professional services firm EY, put forward a list of proposed criteria in late 2018 for measuring the value of human capital. The list includes metrics such as voluntary turnover, diversity at all levels of a company, and participation in wellbeing programmes.

When the Occupy movemement railed against the '1%', de Rothschild listened. (Credit: Glynnis Jones/Shutterstock)

Sustainability-minded investors are frustrated by the absence of comparable data on non-financial issues, she states. Her hope is that the Embankment Project’s proposals, which have the endorsement of the influential Sustainability Accounting Standards Board (SASB), may go some way to providing investors with what they want.

“Benchmarking and the whole idea of a ‘race to the top’ are really important, but I think they are hindered until there are standardised, comparable ways for companies to report on non-financial issues,” she says.

At one point, the Coalition for Inclusive Capitalism taskforce counted President Obama’s chief economic adviser Larry Summers and former Hewlett Packard chief executive Carly Fiorina. The participation of two such prominent political figureheads – one Democrat, the other Republican – speaks to Lady de Rothschild’s fierce belief in bipartisanship.

But Lady de Rothschild isn’t interested in convening big names for the sake of it, not even the Pope. Like the Pontiff, achieving tangible, hard-hitting outcomes from multi-party coalitions takes a delicate balance of push and pull, she says, plus plenty of listening.

My idea of success is that no one is 100% happy. I want some people to feel we went too far and others to feel we haven't gone far enough

“With the Coalition for Inclusive Capitalism, it's not about what I think should happen. It's about setting a goal and working with people who are willing to make that goal stretch as far as we can. So, my idea of success is that no one is 100% happy. I want some people to feel we went too far and others to feel we haven't gone far enough.”

She is taking that same approach to another of the coalition’s new projects, which focuses on the design of rules and guidelines for the booming ESG (environmental, social and governance) investment market among asset managers.

The project remains in its early stages, but Lady de Rothschild isn’t shy about voicing her feelings about the market’s failure to deliver a substantive response to the world’s most pressing social or environmental problems.

Her strongest criticisms are directed at exchange traded funds [ETFs], which see investors passively follow a pre-determined index of supposedly “sustainable” stocks. Speaking at a recent Reuters Events Sustainable Business webinar, she argued that most ESG-oriented index-linked funds have “90% the same stocks as are in regular ETFs”.

Lynn Forester de Rothschild.

Instead of generating meaningful impact by directing capital to sustainability innovators in high-carbon sectors, she added, ESG investors typically opt for “safe” stocks such as big tech firms, which generate high returns but make little material difference on carbon emissions or on other critical sustainability issues.

“They [ESG funds] have done well because when you've invested in Apple and Amazon and Microsoft, then your ETF has done well. [But] have these companies really moved the needle towards a fairer society or a cleaner environment? The answer is probably ‘no’.”

The alternative, she suggests, is to take a more active stance. So, not just going through a checklist with a sustainability officer and “checking the box”, but actually “digging into companies and influencing their behaviour”.

Her new investment fund, Inclusive Capital Partners, which she joined in the summer with veteran activist investor Jeffrey Ubben and two other partners, will aim to take majority positions in publicly listed firms that are proactively (and profitably) seeking to provide answers to the big sustainability challenges of the day. The fund has so far attracted $1.4bn.

There are many efforts to make capitalism inclusive and sustainable, but what we have been missing is a moral base – the poetry to the prose of our action

The number of global corporations genuinely transitioning to a more inclusive model of business are still few and far between, de Rothschild concedes, but the roster of companies involved in the Vatican partnership shows that what would have been a hypothetical argument even five years ago is now a genuine, here-and-now possibility.

The partnership also opens up a conversation about global capitalism’s moral underpinnings. In an age of Covid-19 and climate crisis, even arch-market capitalists can no longer ignore the very real ramifications of treating markets as answerable only to cold numbers and hard logic.

“There are many efforts to make capitalism inclusive and sustainable, but what we have been missing is a moral base for the movement – the poetry to the prose of our action,” she reflects.

“The guidance of Pope Francis provides that poetry to the movement, but humanity's need to be responsible to each other is inspired by the social teachings of all faiths.”

Almost 10 years on from de Rothschild’s Damascene moment, the world is facing an even more frightening economic crisis. The idea of inclusive capitalism has never been more prescient. After a decade taking root, now is its time to take leaf and bloom.

Main picture credit: The Council for Inclusive Capitalism


Pope Francis  Council for Inclusive Capitalism  Embankment Project  COP26  activist investing  Stakeholder capitalism  ETFs  ESG investing  McKinsey  SASB 

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