The Four Pillars of Sustainability serve as Green Alpha’s guiding framework.

The best way to catalyze growth of companies building the four pillars is to invest capital in their shares.

When we founded Green Alpha in 2007, we spent spent 18 months researching and consulting with experts in economics, biology, climate science, ecology, and many other areas of specialization. We concluded that an authentically, indefinitely sustainable economy must balance on four principal pillars.

Four Pillars of Sustainability

  1. Continual economic productivity gains. To provide universally reasonable standards of living, without crossing planetary boundaries and therefore risking large-scale disruptions, the global economy must continually and dramatically improve its productive capacity. In clear terms, this means the economy must be capable of generating far more output per unit of input (natural resources, money, or person hours). To this end, automation, communications networks, AI, machine learning, robotics, genomics, and many other continuing innovations are required. In short, productive innovation, at an exponential scale, will best address the current planetary crises while simultaneously enabling economic growth and broader participation in that growth. Yes, Green Alpha believes that economic growth and sustainability are not only compatible but also interdependent. We refer to this concept as sustainable abundance.
  2. Renewable energies. The increasingly efficient means of production of the first pillar must be entirely powered by renewable energies for an economy to be demonstrably sustainable. Renewable energies are defined by Green Alpha as those with zero input cost of fuel, past the initial production and installation of equipment. This means energies like wind and solar qualify, and energies like biomass, biofuels, and natural gas do not. This is also directly related to the first pillar: economically productive energy from zero cost inputs is a transformational productivity gain.
  3. Waste-to-value supply chains. Extraction of primary geological resources will be reduced to a level that can be sustained indefinitely, which means at far lower levels than is practiced today. Yet, a growing economy will require as much if not more raw materials as it advances. Therefore, life cycle product management and indefinite reuse of economically functional materials is required.
  4. Increased social cohesion. Economic and environmental sustainability will prove impossible under a system of political polarization and/or extreme inequality, as a high degree of social cohesion will be required to achieve realization of the first three pillars, and because individuals and populations enjoying fair standards of living are less likely to unilaterally exploit remaining natural resources for sustenance or gain. Further, erosion of social cohesion due to extreme inequality has historically been demonstrated to be a dangerous risk to economies and entire civilizations and can only be mitigated by improving opportunities for general wellbeing.

The Four Pillars of Sustainability serve as Green Alpha’s guiding framework. Each pillar includes many sub-categories, and myriad investable solutions exist under each. Of course, realizing a Next Economy has been and will continue to be challenging, and we cannot set a time frame for the realization of a global economy so organized, but climate science indicates that speed is paramount and our timeline for avoiding the worst outcomes of the climate crisis is something less than 30 years. The best way to catalyze growth of companies building the four pillars is of course to invest capital in their shares.

When developing our investment philosophy and processes, we also needed to develop a practical road map leading from the incumbent economy to the Next Economy. This involved identifying, evaluating, and investing in the sectors, industries and leading companies advancing development in each of the Four Pillars of Sustainability—in effect creating a portfolio-level model of the Four Pillars of Sustainability framework.

To decisively enhance our investment strategy and execution, we transcended our theoretical constructs to forge a robust, actionable blueprint. This roadmap charts a course from the current economic landscape to the forefront of the Next Economy. It necessitates meticulous selection, rigorous evaluation, and strategic investment in key sectors, industries, and leading enterprises that are at the vanguard of progress in the Four Pillars of Sustainability. In essence, we have crafted a portfolio-level paradigm that exemplifies the Four Pillars of Sustainability framework.

Our methodology integrates insights from the realms of forecasting science and decision-making scholarship. These disciplines are pivotal in modeling future landscapes and providing heuristic tools essential for navigating, and potentially capitalizing on, anticipated developments. A cornerstone of our approach is the technique of future backcasting. This involves conducting a ‘premortem’ analysis, a proactive assessment to pinpoint and mitigate potential risks that could impede our progress towards the envisioned future. Currently, numerous systemic challenges hinder the actualization of the Four Pillars of the Next Economy. Intriguingly, these challenges are, in many ways, the antitheses of the pillars themselves. Therefore, resolving these ‘premortem’ challenges not only fortifies our strategy but also enriches our stock selection criteria.

The barriers to achieving indefinite sustainability are multifaceted, encompassing the climate crisis, resource depletion, biodiversity loss, and escalating social and economic disparities. A thorough examination of these systemic risks furnishes us with another powerful tool for identifying investment opportunities. The solutions to these pressing global concerns are not merely elements of, but are essential steps towards, achieving a state of perpetual economic and environmental sustainability.