Thursday, 14 April 2016
ASSET OWNERS AND A CAPITAL MARKET THAT WORKS
A roundtable for businesses
The roundtable will focus on the top of the investment chain and is organised by An Economy that Works, Tomorrow’s company and the Centre for the Understanding of Sustainable Prosperity.
We all want long-term financial performance and the positive sustainability and social outcomes associated with this. However, too often capital markets fail to deliver these.
This roundtable will focus on the top of the investment chain: what action can asset owners and the investment consultants that advise them take within the current regulatory framework, and how could this be supported by minor changes to regulations?
The roundtable will be addressed by Professor John Kay and Saker Nusseibeh, CEO of Hermes Investment Management, designed for asset owners, investment consultants, fund managers and politicians.
John Kay, and others, have shown that capital markets encourage a bias towards short-term objectives amongst corporate managers, and that this damages returns over the long-term. Extensive academic research has also shown that companies that target sustainability and social outcomes tend to generate better returns over the long-term. It follows that investors with a long-term perspective have an interest in countering the short-termist pressures on corporate managers, and encouraging them to target sustainability and social outcomes. As yet, though, this interest is not driving behaviour very extensively.
While the speakers will describe the problem, we will take it as read that there is a problem, and the bulk of the discussion will be about what can be done about it. While a complete solution to short-termism may require major regulatory and structural change designed to reduce trading volumes, we will focus on what asset owners and the investment consultants that advise them can do given the existing regulatory regime, or given relatively minor and feasible changes to that regime. This will build on a brief summary in the introduction of work already underway in this area, for example on model asset owner mandates.
The discussion will cover questions such as;
- What are the barriers to asset owners using longer-term mandates, and a broader range of performance metrics?
- What is preventing investment consultants advising the adoption of such an approach?
- Should asset owners bring asset management in-house? Or adjust mandates?
- Briefing Paper by Charles Seaford, 21 April 2016: Asset owners and a capital market that works: How we can move forward on this issue.
We are interested in feedback. For details and background information, please contact Charles Seaford.
The event is organised by An Economy that Works and Tomorrow’s Company, in collaboration with the Centre for the Understanding of Sustainable Prosperity. The discussions will guide work that the organisers are doing in this area. A follow up event is planned.
An Economy that Works is a campaign backed by business for progressive policies on sustainability and social justice. Tomorrow’s Company has 20 years’ experience of research and advocacy on how businesses can be a force for good.