Francois-Henri Pinault is the CEO of PPR, corporate parent to some of fashion’s best-known brands. So why has the guy who sells Gucci, Alexander McQueen, and Stella McCartney designs to the rich and famous set up PPR Home to oversee a wide range of ecological and social initiatives, including environmental profit-and-loss statements and sustainable python farming?
The answer is resource scarcity. Not the kind of language anyone reading about the Spring 2013 fashion lines will find in Vogue. Enough of a concern to Pinault, however, that he has been adding a group of middle-class lifestyle brands like Puma, the German sneaker maker, to PPR’s stable of companies. PPR Home’s sustainable planning goes something like this: $6,000 snake skin handbags may have a limited market even with more controlled farm breeding, but middle-class consumers will always need sneakers.
In February’s New York Times Style Magazine, Pinault said that “Sustainable development is a fundamental break that’s going to reshuffle the entire deck. There are companies today that are going to dominate in the future simply because they understand that.”
In addition to Vogue, I suspect Pinault reads articles like “Resource Revolution: Meeting the World’s Energy, Materials, Food and Water Needs, from the McKinsey Global Institute. The article shows that since 2000, commodity price increases have erased a century of steady declines. And, the volatility of these prices is at an all-time high. In one startling statistic, McKinsey projects 3 billion more middle class consumers in the next 20 years. Given supply and demand, the crucial question the articles poses is “. . . whether an era of sustained high resource prices and increased economic, social, and environmental risk is likely to emerge.”*
So as finance professionals we’re looking at two major trends: increasing resource consumption and volatile but rising commodity prices. What does this mean? The smart long-term strategy is to look for companies that have a plan for dealing with resource scarcity in their business model. One way to do this is to choose SRI investment portfolios that have ESG criteria built into the company selection process. Investors can start by visiting the US SIF website (www.ussif.org) to review their SRI mutual fund list.
You should consider the investment objectives, risks, charges, and expenses of an investment carefully before investing.
*“Resource Revolution: Meeting the World’s Eenergy, Materials, Food and Water Needs,” McKinsey & Company Quarterly Newsletter, November 2011.