Einde inhoudsopgave
Corporate Social Responsibility (IVOR nr. 77) 2010/12.2.2.1
12.2.2.1 A shift towards a mid-term and long-term perspective
Mr. T.E. Lambooy, datum 17-11-2010
- Datum
17-11-2010
- Auteur
Mr. T.E. Lambooy
- JCDI
JCDI:ADS369506:1
- Vakgebied(en)
Ondernemingsrecht (V)
Voetnoten
Voetnoten
See e.g. World Economic Forum & AccountAbility (2005); Centre for Financial Market Integrity & Business Roundtable Institute for Corporate Ethics (2006); Guyatt (2008); BSR (2008). Also Grant Kirkpatrick, in a OECD-rapport (2009): 'that the financial crisis can be to an important extent attributed to failures and weaknesses in corporate governance arrange-ments.(...) remuneration systems have in a number of cases not been closely related to the strategy and risk appetite of the company and its longer term interests.' (p. 1 and 2), see: www.oecd.org/dataoecd/32/1/42229620.pdf, accessed on 5 July 2010. See also: the Report of The High-Level Group on Financial Supervision in the EU, chaired by de Larosiere (2009): '[Corporate Governance] is one of the most important failures of the present crisis (...)the financial system at large did not carry out its tasks with enough consideration for the long-term interest of its stakeholders. Most of the incentives (...) encouraged financial institutions to act in a short-term perspective and to make as much profit as possible (.. .)the new accountingrules were systematically biased towards short-term performance'; p. 29, 30 at: http://ec.europa.eu/internal_market/finances/docs/de_larosiere_report_en.pdf, accessed on 7 April 2010.
One of the French pension funds is considering investments in 'biodiversity-friendly' products.
The interviewee more specifically mentioned that it was not able to provide a type of information on biodiversity that was useable for investors and asset managers.
The short-term focus is still dominant within the financial world. This regards both the valuation of investments as well as the sell and buy decisions. This short-term tendency was mentioned as a barrier to the inclusion of ESG criteria in investment decisions in all interviews. Institutional investors are expected to invest money with a long-term horizon, thereby paying attention to 'People' and ' Planet' aspects, but at the same time pension fund managers have to meet financial targets and to publish their financial results on a regular basis. They expect from their asset managers the highest possible financial returns. Asset management companies use quarterly benchmarks to evaluate fund managers' performance, often with consequences for their remuneration. The current system does not cater for incentives to make investments with sustainable long-term profits in terms of 'Triple P' performance. It is tempting for business leaders to focus on short-term performance goals, at the expense of the longterm sustainability and prosperity of their businesses.1 From an investment perspective there is, for example, no compelling reason not to invest in the soy and palm oil industry, even though it is well known that the Amazon and Indonesian natural forests are heavily damaged by the activities in this sector, and that current business practices are not sustainable in the long term. Biodiversity loss has clearly long-term implications.
More specifically, this 'short-term' tendency results in a lack of demand for BES information, as was mentioned by several of the interviewees of all three focus groups. The few organisations that do purchase BES information are mainly ethically-oriented investment groups. Mainstream demand is lacking. With one exception,2 none of the asset managers received specific enquiries for biodiversity-friendly investments from institutional investors. One of the interviewed ESG Agencies excluded the biodiversity indicators from its database, because they were hardly ever used.3 Another ESG Agency explicitly stated that it needs market demand in order to develop new tools and services. The resources for proactive product development are limited.
Due to the financial crisis, the short-term versus long-term issue is receiving a great deal of attention. It will be interesting to see what changes the current economic situation will bring about in respect of the short-term focus of the financial world. There seems to be a growing momentum to incorporate longerterm considerations into investment decisions. The development of biodiversity information services could simultaneously profit from and add to the developments in this field.