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Dear Mr. Buffet, Please Speak Up on Corporate Responsibility

So America’s greatest investor and economic cheerleader, Warren Buffet, discussed his annual investment outlook recently for 2011. This included, among other things, a recovery of the housing market during this calendar year (noted). But it got me wondering about his interest in sustainability, particularly as it relates to his already mythic influence in the world of business and investing.

I’ve mentioned Mr. Buffet in the past in regards to his company’s previous holding of Petro China stock, a company that has been doing aggressive business in Sudan. Nothing illegal was happening as indirect investment by American individuals or companies in Sudan (and other countries under economic sanctions) is acceptable. However, although he said they cashed out due to profit taking measures, it was more likely due to outside pressure. Around that same time (2007), Buffet stated that he would not rate his company or company’s he owns based on environmental, social and governance factors (ESG) and would not consider these issues when investing.

Is this a case of Buffet just being old and outdated? I think it’s a valid question as he is a man who’s done business in the US since the early 50’s and is well into his 80’s. However, he has donated a ton of his fortune to working on international development issues, which one might have to credit as being at least somewhat progressive.

Buffet’s company Berkshire Hathaway is mildly confusing (not to mention has one of the worst looking websites of all time…I guess he is pretty frugal). It is a large company that owns other companies, primarily in insurance but also in manufacturing, retail, building products and energy to name a few (the website lists about 50 subsidiaries). It also invests significantly in other companies where it may have a minority stake. With that being said, Berkshire Hathaway has never issued any type of sustainability report and as of 2010 only one of its subsidiaries has produced a formal report (Shaw Floors).  In fact, you will not find the word sustainability in his 2010 letter to shareholders.

So my question is this. For someone who is known to be so thorough and meticulous in pouring over financial data for various investment purposes, why would Warren Buffet dismiss, out of hand, ESG considerations? We know these indicators are often difficult to tie to financial performance, but there’s absolutely no reason why they should be overlooked, especially with the amount of money he moves around. Considering there are still plenty of investors (and the media) who hang on his every word, he’d be a great mouthpiece for corporate responsibility. After all, his constant dialogue addressing how strong the American economy has been and will be (backed up by recent relevant investments) may have had more to do with propping up the failing US economy than the actions of American policy makers.

Image Credit by Ngoc Nhan via Flickr under a CC license

Written by Jonathan Banco

Jonathan has worked in both journalism and various facets of small business development over the past eight years. Most recently, he graduated from the Monterey Institute of International Studies (graduate school of Middlebury College) in 2010 with an MBA and an MA in International Development Policy. His interests include SME development and its role in economic growth, particularly in Sub-Saharan Africa as well as how CSR/Sustainability measures impact both business operations and the communities in which businesses operate. While at MIIS he worked as a summer fellow involved in small business consulting in Accra, Ghana and was an active member of the MIIS Net Impact chapter. As a life long traveler, Jonathan has been fortunate to have lived in, worked in or visited over 20 countries on 5 continents and he truly hopes that he will be able to continue this trend.

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