To read the headlines, you could easily be forgiven for thinking that ESG integration in capital markets is now fully underway, as the value of global assets applying environmental, social and governance data to drive investment decisions has soared to $40.5 trillion and now represents more than a third of the $95 trillion equity market in 2020.
Some people say the solution to the ESG challenge is to embed social-purpose statements into corporate charters, and that this will oblige companies to consider all stakeholders and to measure and report on their social effect. This sounds good – but as we engage business in trying to meet the sustainability challenge, is corporate structure the right place to focus?
When modern portfolio theory arrived on the scene in the 1950s, it was considered revolutionary. It changed the way that investors perceive risk, return and portfolio management and permanently altered the investing world and financial markets.
“It’s time for a new way to think about investing, one that can contend with the complex challenges we face in the 21st century,” authors William Burckart and Steven Lydenberg write in the introduction to their new book, 21st Century Investing: Redirecting Financial Strategies to Drive Systems Change.
Let’s be clear about mandated standards for financial and sustainability reporting, especially what they are and what they are not. Standards are a social construct. They are a consensus about how to represent a company’s performance. They are a baseline for analysis and dialogue that can be supplemented in many ways.
What are the biggest threats to an investor’s portfolio these days? Climate change impacts all investors across all asset classes. Income inequality threatens to polarize politics, paralyze governments, destabilize democracies, and lead to nationalistic populism, trade wars and even geopolitical conflicts.
Critics claim that today’s companies and financial markets are severely out of balance and are focused on short-term quarterly results and raising their stock price via share buybacks rather than investing for long-term success. A quick scan will generate plenty of examples to confirm that point, for example Kraft Heinz, but is this the reality?
Everyone has an opinion about short-termism. It has been blamed for underinvestment in infrastructure, basic science, human capital, and research and development.
“Tell me which of the pressing issues of our time keep you awake at night, and I will tell you how the old rules of profit maximization and short-term thinking contribute to those problems,” Judy Samuelson writes in the introduction to her new book, The Six New Rules of Business: Creating Real Value in a Changing World. The rules are changing. The COVID-19 pandemic and other recent crises have made it clear that business and society are more intertwined than ever before, and the old notions of “what is good for business” are no longer sustainable for society – or…
Finance is, or normatively should be, a service function. For example, asset management provides investors with a desirable risk/return profile for their investments and allocates capital (intermediation) where it is needed by society and the real economy.