The name Goldsmith hardly needs an introduction. The late Sir James “Jimmy” Goldsmith was and remains one of the true larger than life characters of all times, exerting continual fascination over admirers and detractors alike. His legacy as a man, an industrialist, a tycoon, an environmentalist and a thinker may be a well-nigh impossible act to follow, but his buccaneering spirit lives on in his children. Ben Goldsmith is his younger son with Lady Annabel and a full brother to Zac and Jemima.
While still in his early twenties he decided to explore venture capital opportunities in the then-emerging area of clean tech and this led to an alliance with clean tech consultant WHEB. Ben was instrumental in transforming the company from an advisory business into a leading investment firm “focused on more sustainable, resource efficient and energy efficient economies” with approximately €£500m under management.
The Goldsmiths have always had a strong tradition of philanthropy and political activism as well as business. Ben is no exception. As the chair of the Advisory Board of The JMG Foundation he soon realised that philanthropic organisations tended to focus on their own missions, with little awareness of what their peers were doing. So he co-founded the UK Environmental Funders Network, which brings together over 150 trusts and foundations. The network has since co-ordinated over £75 million across six thousand grants to environmental advocacy initiatives.
Politically, he has contributed to both the Green Party and the Conservative Party. In 2013, he helped re-launch the Conservative Environment Network (CEN), which seeks to give voice to conservatives who believe stewardship of the environment is core conservative territory, and who have a preference for decentralized, markets-orientated solutions to environmental and resource issues.
CEN is a transatlantic coalition drawing on contributions from centre-right figures including Sir James Dyson, former Marks & Spencer CEO Lord Stuart Rose and Arnold Schwarzenegger. The group made headlines earlier this year when it encouraged conservative parties around the world to do more to protect the environment, with Dyson explaining the positive impact green policies have on business by noting that “being environmentally conscious” would remove the reliance on foreign oil and “give us energy freedom”.
BB: Can finance ever be beneficial or a company make money operating as a for-profit business and at the same time make a positive impact?
BG: Yes and there is already a successful model. What’s interesting is that conventional businesses that have been around for a very long time are starting to become positive impact businesses. For example, Office Depot in the U.S. is a huge retailing business, the number one office supplies business in the U.S., and it has an aim now to be net positive through its activities, so producing zero net carbon and generating a surplus of renewable energy.
Unilever also has a huge sustainability program. A billion people use Unilever products every day, and the company is looking at how to ensure each product sold has a net positive impact on the environment. That includes looking down the supply chain at all of the suppliers and how the ingredients are sourced and manufactured. Unilever is becoming a real force for good. Wal-Mart is another one with a huge sustainability program. Stuart Rose, the former CEO of Marks & Spencer, was the first FTSE100 chief executive to seriously invest in a sustainability program.
They called it Plan A (with strap line ‘because there is no Plan B’). It was interesting to see the resistance from the city and the Marks & Spencer shareholders at the time (2005-2006). They told him he was supposed to be making money, and that this program was costing money. He told them to wait and see. In 2012 they had repaid all of the capital investment for Plan A and made £80 million in surplus as a result of less packaging, less fuel in the trucks, and lower water and electricity bills. They made that surplus by increasing their efficiency in using resources. Not only was there the hard payback of the surplus money, but they had soft benefits too: customer loyalty, increased footfall in their stores and a stronger public image.
BB: What do you think has driven this change in corporate behaviour?
BG: A key driver behind companies looking at these issues is cost. The Industrial Revolution, which started here in Great Britain two hundred years ago, brought labour efficiency and capital efficiency, but not resource efficiency. For the next hundred years everyone operated as if resources were unlimited, that everything is infinite. As a result, every part of the economy has been wasteful in its use of energy, water and raw materials. The last century saw a decline in the cost of all commodities, but those declines have been wiped out in the past decade. A barrel of oil is ten times more expensive now than ten years ago.
The consensus now is that volatile prices are here to stay. That seems obvious; we have exponential growth in population and GDP, but we’re on a single, finite planet. Companies across all the industrial sectors have realised that their supply chains are more vulnerable than they thought. The CEO of ASDA made a statement recently that 93% of its supply chain is vulnerable to climate change, water shortages, price volatility, and that if they can produce the same units with fewer inputs, they will save money in the short term and have a business that’s better prepared for future volatility.
BB: Do you think sustainability should be taught as part of the University curriculum?
BG: I had an interesting discussion with a LSE professor recently, in which I joked that they should change the name to London School of Economics and Ecology. Economics is a derivation of the Greek ‘okionomia’, meaning house or household affairs management – how we earn resources or income and how we spend it on necessities, comfort or luxuries. ‘Eco’ or ‘ecology’ means the study of one’s home, habitat or environment. I think many big corporations are ahead of the curve on these issues because it has such a direct impact on their bottom line. Sadly, governments are behind the curve and even investors haven’t yet understood the relevance of these issues to their investment portfolios. There are lessons from recent history that we can learn from. Look at Kodak, it disappeared only four years after the arrival of digital photography. Kodak didn’t anticipate that arrival and didn’t react to it. I think that the changing world today, the realisation that resources are finite and that we need to become much more efficient, are all presenting a major challenge to companies that don’t adapt. In that sense, I think we are going through a new industrial revolution.
BB: You have also been involved in solar projects. Can you share your thoughts on this?
BG: If there is a new industrial revolution happening then one of the big stories is the transition to renewable energy. The most interesting aspect of that is solar, because the Chinese government decided, within the last decade, that China would become a world leader in manufacturing solar technology. They invested huge amounts of time, money and resources into building this manufacturing capability. The result of that is the price of solar panels has come down very, very fast. The price has dropped 85% in the past four years alone. Every year the price declines by another 15% to 20% with similar kinds of price declines that we saw in semiconductors in the 1990s China has made this tremendous gift to the rest of the world, putting effort into manufacturing cheap solar. The result of this is that solar is now becoming the cheapest electricity option in a lot of places – the cheapest option anywhere with high electricity prices and a lot of sun. An interesting example is the Caribbean basin, which is reliant for its power on imported diesel (increasingly volatile and increasingly expensive), so solar is a much cheaper option there. McKinsey said in a recent report that solar will be the cheapest electricity option for two-thirds of the USA by the end of 2016. If we consider the fact that five years ago it only existed because of government subsidies, we’d realise how fast its price has come down. Of course, the cost is all upfront, so there are a number of ways of financing it. With other kinds of electricity you are paying for gas, uranium or coal, and you can hedge your output prices against your input prices. Solar is different because all the cost is upfront, but then the sun is free. There is no input consideration. Elon Musk of Tesla recently said that he believes solar power will be the largest source of electrical energy in the future. Until we make fusion work, which only happens in the core of the Sun, indirect fusion being solar power is the next best thing to nuclear fusion that we have on Earth.
BB: Some would say nuclear is a relatively cheap option, but it is not (cheap) once you take into account other costs which are hidden in government subsidies.
BG: Absolutely. There’s also the cost of insurance. A nuclear power plant needs to be insured against disaster, and the government pays for security so that no one drops a bomb on it, plus the cost of cleaning up afterwards in case anything does happen. There’s also the risk of contamination and storing the waste. Nuclear waste lasts for up to 20,000 years, so actually if you take all of that into account then it’s the most expensive form of energy there has ever been. The last Italian nuclear plant closed in 1978, but Italy still spends €3 billion a year managing the waste. In the UK, nuclear cleanup costs are mounting towards £70bn, described by the head of the public accounts committee as ‘an absolutely appalling waste of public money’.
BB: You have supported the Conservative Party. Do you feel your politics and environmental views align?
BG: I think to be conservative is also to be environmentalist. If you look at the history of the environmental movement, it was Theodore Roosevelt who introduced the national parks. Richard Nixon introduced the Clean Water Act in the US and said that all American rivers and lakes need to be drinkable, fishable and swimmable. Margaret Thatcher and Ronald Reagan introduced the Montreal Protocol to solve the ozone problem, and Margaret Thatcher initiated the international effort to combat climate change.
Angela Merkel was the creator of Kyoto. Conservative politicians and conservative thinkers have a rich history of providing solutions to environmental problems. So I feel like it’s entirely compatible. I am a believer in conservative-orientated market based solutions driven by the problems. The trouble now is there have been certain strains of near conservatism in the last 10 or 15 years that reject any efforts to deal with the environmental degradation. The right has given away the territory to the left and then the left has come up with the solutions and because those on the right didn’t like their solutions, they denied the problem. The correct answer is we agree there is a problem, but we have our own set of solutions. I believe that a forward-thinking conservative should be at the forefront of putting forward cutting edge, market-friendly solutions to these problems.
SABMiller, one of the biggest brewing companies in the world, realised from their brewing operations in Columbia that the water supply was dwindling. They also realised that they shared their water supply with the City of Bogota, meaning water competition which the city was going to win of course. They started to employ some scientists to look at where the water was coming from and they discoveredit was from the rainforests in the hills around Bogota and that the water was dropping because of the rainforestsbeing destroyed. So they came to a deal with the City of Bogota in which they put up money to replant trees and to protect the forest.
Today hundreds of thousands of acres around Bogota are protected with funding from SABMiller, and they did it to protect the supply chain. They did it to protect their water supply, and in doing so they protected the supply of water for Bogota City and a hugely important rainforest. This is a perfect example of the market solving an environmental problem and I consider it a recognition that in fact the economy is just a subsidiary of Mother Nature. This for me is an example of a conservative solution to an environmental problem.
BB: Have you always had your passion for sustainability?
BG: I grew up loving nature and the environment. When I was a kid I used to like fishing, going to the woods and looking for wildlife, looking for birds’ nests. Then as I grew up and started reading in the papers about things being destroyed, I began to realise how important this was. My generation was the first to learn about the environment in school and I learned that the things I loved were under serious threat. My passion for what I do comes from a love of nature.
BB: What role models, other than your immediate family, did you have growing up?
BG: I was 15 when my father died, so I never had a properly adult conversation with him about business or politics. Perhaps not having a very powerful father figure in my life allowed me to be who I want to be and focus on what I want to focus on. There is a chance that I would have been an investment banker in Hong Kong under my father’s direction; I don’t know how my life would have been if the circumstances were different. On the one hand, I had a responsibility to live up to this great man, but on the other hand I had a level of freedom because he wasn’t around. But my family has always challenged the status quo. My father’s older brother was a founder of the Green Movement in Europe, so I grew up in an environment that said you should question everything and be willing to change the rules.
Most of the people that I look up to are people I have learned about as I got older. The Prince of Wales is a good example, because he is a visionary and talks openly about lots of issues that I care about. But role models change, of course. As a child I was obsessed with Elvis Presley, but now I find people like Stuart Rose very influential. Jeremy Grantham runs an investment management business called GMO in Boston – he understands the relevance of the environment to investment. He accepts that if you disrupt the environment you no longer have an economy.
BB: What is your typical workday like?
BG: I have two main activities. I chair my family’s investment group, and I have been building a sustainability focused fund management business – WHEB. The thinking is that the transition to a resource-efficient economy is creating numerous investment opportunities and the fund management strategy is to try to capture them.
BB: What else are you passionate about?
BG: I believe that nothing comes before family and take that very seriously. As an adult, with my own children, my life is different to what it used to be, though. On the weekends I retreat to a farm in Somerset where I have my children most weekends. There are pigs, ducks, geese, chickens, horses and a fire pit in the middle of the courtyard. It’s very cozy and relaxing, so I go as often as I can. My family is very close knit. We have Jews and Muslims and Christians in the same family, but this has never been a problem. Like any family we have disagreements but nothing really serious and there’s no crossover between personal issues and business issues. Plus, we get to celebrate all the religious festivals.
All this really helps one maintain focus on what’s important in life and reinforces the importance of philanthropy and using the time I have to try and make a positive impact. I grew up loving nature and now as an adult I see the threats that it constantly faces, but I see in my children the same wonder and enjoyment that I experienced at their age and of course they’re young enough to be unaware of many of these threats. This is a constant reminder of the importance of what I’m doing, with both the ecological work and the fund management, because of the positive impact economics can make on the environment.