We are doing it for our grandchildren

More and more young people are worried about the liveability of our planet. They are asking themselves what their future will be like. Kurt Devooght talks of ‘generational justice’. He is Professor of Economics, Ethics and Sustainability at KU Leuven University (Brussels & Antwerp Campus) and chairs the SRI Advisory Board at KBC Asset Management.

“The Board aims to provide an answer to those concerns. It means that we are aware that what we do today determines what the future will be like for subsequent generations.” The present generations have evolved from knowledge about climate change to awareness around the theme. Where research on climate change and human influence on the greenhouse effect was long the preserve of a select group of scientists, it has now become mainstream.

The general public, partly thanks to the documentary ‘An Inconvenient Truth’ by Al Gore, has been made aware of the problems surrounding global warming. That growing awareness has led to climate agreements and climate summits, such as the recent COP26 Climate Conference in Glasgow. “So our generation has no excuse for doing nothing. The problems are known”, he says firmly.

In discussions about climate change, the year 2100 is often cited as the time horizon, but it seems a long way off. “It’s closer than you think”, affirms Johan Van Gompel, senior economist at KBC Group and chair of the Study Group on Population Ageing.

“Someone born today will in all likelihood still be alive in 2100. And hopefully that will also apply for a great many of today’s teenagers. In many debates or climate marches you hear slogans like ‘We are the future’, and that’s right. That makes it immediately very clear who we are making these efforts for.”

Johan Van Gompel says that we sometimes have difficulty imagining the future. “There’s a term for it”, he says. “Present bias is a common mistake. Because we find it so difficult to imagine ourselves in the future, we focus too much on the present.”

According to Van Gompel, our current knowledge enables us to form a reasonably good picture of what awaits us in the coming decades. “There are some things about which we already have a high degree of certainty”, he says.

“For example, we already know that population ageing is set to become a real issue. The ‘population pyramid’, with a narrow summit made up of older age groups and a broad base comprising young people, will change into a ‘beehive’ shape, with a narrow base of young people, a broad middle section made up of people aged 45-65 and a steadily broadening summit of over-65s. As a result, the younger age groups will find it increasingly difficult to support the growing group of older people.”

More of us also live in towns and cities, and we will manage and generate our energy in a different way. Van Gompel sees opportunities in all these changes. “We can use digitalisation, technology and AI to develop solutions and deploy alternative energy sources”, Van Gompel says.

He warns about a common fallacy whereby we expect that only known trends such as population ageing or climate change will determine our future. “We have a tendency to regard issues in which we are interested or about which we already have some knowledge as the determinants of the future. And agreed, it is important that we prepare for the factors we are already aware of.

But uncertainties also play an important role, things that we don’t yet know today. Think of technological progress, for example, or an unexpected pandemic for which we have less time to prepare.”

The focus on the present makes it hard to change our behaviour now, even though it’s clear that there’s an urgent need to do so. “We know for sure that we will have to change tack”, says Johan Van Gompel. “It’s better to get ready for that now and to ensure that our economy and industry are prepared for it.

We also need to train people in sectors where we know they will be needed. Countries which investigate these challenges, are already investing in them or gearing their policy to them, will make the difference in the future compared to countries which are not doing that.”

The question, of course, is how you make a difference. Johan Van Gompel makes it concrete: “To distinguish countries which are leading the way from countries which are dragging their feet, we look at a range of aspects within our own ESG screening methodology. To assess the quality of governments and institutions, for example, we look at the future-focused vision of a country.

One aspect is the country's approach to renewable energy. A second important element is the contribution of governments in education. This helps us to see to what extent a country is developing its knowledge economy, because knowledge will also lead to solutions for the problems we are facing.

The ecological footprint is also an important indicator for assessing the impact of a country on its present ecosystem and how that evolves over time. Finally, we use the Climate Change Performance Index to monitor the progress of countries in relation to protecting the climate.”

Generational justice is not just a matter for countries and governments, but also something to which businesses contribute. “The journey to a more sustainable world is a ‘both…and’ narrative”, recounts Kurt Devooght. He sees companies with new earnings models where the focus is no longer on consumption, but on offering reusable products. “Or companies which completely refocus their activities towards developing new solutions.”

A financial institution can also play a role here, both directly and indirectly. Examples include loans which the bank grants for certain energy-saving renovations, or specific support it offers to companies to help them on the path towards sustainability. “Investors can also have a big impact as the money they invest ends up in the economy,” adds Kurt Devooght.

Take the example of pension savings funds, which together represent a large amount of capital. More and more asset managers are excluding oil companies from their pension savings funds. Across all tension funds together, that has an enormous impact and pushes the energy transition in the right direction.

Because that transition is crucial for future generations, the bank-insurer KBC recently decided only to offer pension savings products in the form of a socially responsible investment solution.