Mainstreaming Responsible Investment - AccountAbility

Executive Summary
Opportunities for Progress
Responsible investment requires an orientation towards
strategies that optimize long-term returns, both because this
delivers better financial returns over the time profile that
interests intended beneficiaries, and because over these
periods social and environmental issues become more material
and so can be better considered. Realigning fund management
towards the longer-term performance of their investees requires
a host of measures, embracing changes in incentives,
competencies and available information. Following is a
summary of recommendations emanating from the roundtable
discussions and chapters contributed by expert participants:
Modify Incentives
Establish an international set of good governance principles for
pension funds — a voluntary Fund Governance Code – that
ensures accountability (disclosure of votes, policies, and
management relationships) and professionalism (training,
representation) on the part of boards of trustees. The aim of
these principles would be to ensure the representation of longterm
beneficiary interests in intent, capability and practice.
Modify pension fiduciary rules which discourage or prohibit
explicit trustee consideration of social and environmental aspects
of corporate performance.
Increase the average duration of asset manager mandates to
lend momentum to current experimentation with fund manager
compensation arrangements linked to superior long-term
performance.
Increase disclosure of fund manager compensation structures to
encourage better linkage between pay and long-term performance.
Develop new business models for research on non-financial
issues by analysts and incorporate this into the current regulatory
review of the sell-side analyst function in diversified investment
houses.
Require analysis of material non-financial factors to be included
in pension fund mandates to asset managers.
Develop new performance assessment models that enable
trustees to support long-term investment strategies while
complying with fiduciary obligations.
Build Competencies
Pay, train, and empower pension fund trustees more like
corporate directors in order to increase the capacity of boards of
trustees to exercise independent judgement in the long-term
interests of beneficiaries.
Create a specific professional competency for non-financial
analysis either through increased training of existing investment
analysts or the establishment of a new category of specialists.
Increase the emphasis on non-financial aspects of corporate
performance in graduate business schools and mid-career
analyst educational programmes.
Improve Information
Improve the consistency of the content, collection and assurance
of material non-financial information.
Refine the concept of materiality and the basis for measuring and
communicating its application to the links between financial
performance and social and environmental performance.
Re-evaluate the relationship and relative organizational standing
of buy-side analysts and portfolio managers in order to cultivate
a more attractive long-term career path for analysts, allowing for
the accumulation of necessary expertise.
Expand the dialogue between analysts and corporate investor
relations officers on the need for greater consistency in the
content, collection and assurance of non-financial information.
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