10 guidelines for inclusive capitalism
What makes capitalism inclusive and how is Legal & General practising what it preaches?
Legal & General CEO Nigel Wilson has been sharing his views on forbes.com about inclusive capitalism. He believes that 30 years of unbridled capitalism have left many questioning the fairness of an economic system that has created huge wealth, while leaving so many people behind.
Our business strategy is based on ‘inclusive capitalism’ but it can be a difficult concept to understand. We want to protect our customers’ financial lives and add value for shareholders, but we want to do that by investing in things that are good for society as a whole. In this way, more people can benefit from economic growth.
Here, we’ve taken the 10 traits of inclusive capitalism that Nigel has highlighted and sought to demonstrate how we’re making them a reality.
1. Inclusive capitalism is patient
Sometimes capitalism is short-term and transactional. We aim to fund large-scale, long-term projects, which are both economically productive and socially useful. Instead of the short-term focus on quarterly earnings announcements. Our £400 million investment to rejuvenate Cardiff’s Central Square, for example, will create new offices, high-quality apartments to rent and a new bus station, and will boost the city’s economy.
2. Inclusive capitalism benefits a broad range of people
While delivering a financial return for investors, investments and initiatives must also carry a broader social benefit. We have, for example, committed £66.2 million to bring hundreds of houses and apartments in Croydon back into use for families currently living in emergency accommodation. The council will lease the properties on a 40-year term and will save £24 million.
3. Inclusive capitalism creates new initiatives
Companies must undertake initiatives and projects that lead to new assets and new jobs. A company practicing inclusive capitalism might invest heavily in making a regional city a better and more technologically appealing place to live. Projects we’re investing in, for example, include the Newcastle Helix, a cutting-edge, 24-acre development we expect to become a centre of world-leading research and technological advances.
4. Inclusive capitalism helps to solve market or policy failures
For example, an exemplary company might not only invest in making the healthcare system at large more efficient and effective, it might also take steps to tackle, say, wellness in later life. That’s exactly what we’ve done by providing £20 million to fund the creation of the Advanced Care Research Centre at the University of Edinburgh, where academics will tackle the need for better care for our ageing population.
5. Inclusive capitalism should be politically agnostic
The opposite of divisive or 'populist.' Companies might finance local or regional growth by partnering with leaders of all political shades. Regardless of political leanings, we are collaborating with local authorities across the country, to build homes, carry out major regeneration projects as develop science and technology centres.
6. Inclusive capitalism supports environmental, social and governance (ESG) measures
Investing in urban regeneration, affordable housing, clean energy and small business finance is the mark of a socially and environmentally conscious business. But it’s important for investment managers to practice what they preach. This year we divested from five companies in our Future World fund, including oil giant ExxonMobil, largely because of a lack of strategic awareness on climate change.
7. Inclusive capitalism strives to use technology for broader benefits
Taking financial inclusion as one example, companies practicing inclusive capitalism might employ technology to expand the use of auto-enrolment to get employees to save for a rainy day. In June 2020, we switched on our new pensions portal for 3.7 million people, making it easier for them to manage their pension savings.
8. Inclusive capitalism requires that we break the cycle of combined educational, financial and digital exclusion
Lacking access to decent education creates social exclusion and isolation. The same is true of being unbanked or not being able to afford basic technology. We support universities through, for example, our £4 billion commitment to build housing and science parks for Oxford University and our investment in student accommodation and academic facilities at Exeter University. And we provided a £40 million debt facility so that Thames Valley Housing Association could provide 500 high-quality new homes for key workers.
9. Inclusive capitalism strives to break the cycle of intergenerational inequality
Studies have shown that younger generations lack sufficient assets and access to capital to get a start in life. Last year, we provided lifetime mortgages to the over-55s worth £965m. This releases money older people have tied up in property and, according to our Bank of Mum and Dad surveys, many use it to help their children onto the housing ladder.
10. Inclusive capital need not involve making hair-shirted sacrifices
There’s no reason why a business has to be less profitable because it’s also socially useful. Focusing on our inclusive capitalism strategy, in 2019 Legal & General achieved a total return of more than 40% for shareholders and an operating profit of £2.3 billion.
You can read Nigel Wilson’s article on forbes.com