Leading asset managers slam market's short-term focus
Diminishing resources and growing demand are building up hidden liabilities that short-sighted businesses will one day have to pay for, a cohort of asset managers say.
The Investment Leaders Group, incorporating 11 asset managers and other investment companies running more than $5trn between them, has released a report titled The Value of Responsible Investment arguing its case for less short-term thinking.
The group grew out of the Prince of Wales’ P8 Group and officially launched in October. Its members include First State Investments, Pimco, Standard Life Investments and Aviva Global Investors.
Its report outlines the looming problem for the coming 35 years - providing for 9 billion people all seeking an affluent lifestyle, with a stagnant supply of land and water.
Human activity has already degraded Earth’s resources, while a changing climate and consistently short-term outlook from the world’s companies and governments could exacerbate that further, the report says.
The report maps the global environmental and social risks for likelihood and impact. The most pressing it sees are fiscal crises, water shortages, climate change, unemployment and underemployment, extreme weather and income disparity.
Philippe Zaouati, ILG chairman and chief executive of Natixis Asset Management subsidiary Mirova, says corporations are yet to embrace their responsibility to subsequent generations despite more than 1,200 signatories to the Principles for Responsible Investment.
“In spite of a widespread rhetorical commitment to responsible investment principles, market dynamics remain pre-occupied by the short term, and the majority of investment does little to answer the challenges of our time,” he says.
The Investment Leaders Group plans to commission research to find the cost of the environmental megatrends on current and future economic performance.
It also plans to align fiduciary duty with ESG values and increase investment in the low-carbon, green economy, as long as the investment case measures up and governments offer “enabling actions”.
Large investors have the power and responsibility to push companies to make better long-term decisions, Zaouati adds.
The University of Cambridge Institute for Sustainability Leadership is secretariat of the group.
Its business platforms director Jake Reynolds says companies need to be addressing the long-term constraints posed by increasing populations and finite resources.
“In a world that neglects to account for social and environmental costs on corporate balance sheets - costs we know can ultimately impact value - responsible investment can be seen not only as a smart investment strategy but as an essential response to growing sources of systemic risk,” he explains.
Investment Leaders Group members
Allianz Global Investors
Aviva Global Investors
First State Investments
Mirova (Natixis Asset Management)
Nordea Life & Pensions
Standard Life Investments
TIAA-CREF Asset Management
Zurich Insurance Group