Mainstreaming Responsible Investment - AccountAbility

Responsible Investment Futures
Tipping Points
It is almost always possible to create some positive change. It
is harder to identify the combination of viable actions that
would make a significant difference. For example, requiring
analysts to demonstrate competencies in their handling of nonfinancial
information would certainly make a difference. But
these changes might remain relatively small if not accompanied
by other changes, for example, in how fund managers receive
incentives. There is a need to focus not just on what counts,
but on what could potentially count in a significant way.
There is no one-stop, “silver bullet” to making the mainstream
financial community more responsive to some of the softer
non-financial factors — including social and environmental
aspects of corporate performance — that have an important
bearing on the success of business models and companies
over the extended period (during which most investors in
pension funds, mutual funds and insurance companies commit
their retirement savings). This viewpoint was confirmed
throughout the roundtables and the background research, and
reaffirmed in other responsible investment initiatives. The
preceding chapters, including the three authored perspectives,
have identified many of the impediments to mainstreaming
responsible investment. The dialogue and research indicated a
high level of agreement about the nature of these
impediments. While these can and have been described
individually, taken together what emerges is a view of an
institutional culture spanning much of the investment
community that needs to be reshaped. Finally, a widely shared
view has been that, left purely to the pressures of the market,
the investment community would be unlikely to overcome
these individual and more pervasive institutional impediments.
Focusing effectively on key tipping points is partly a matter of
timing. Unblocking barriers in the wrong sequence is a little like
“pushing on a rope”. For example, improving the materiality of
data that connects non-financial outcomes to long-term
business performance might have little effect if pension fund
trustees are unwilling to establish mandates for fund manager
that focus on long-term performance. Similarly, increasing
analysts’ competencies in understanding the interface between
longer-term business fundamentals and social and environmental
performance will have little impact if their clients, fund managers,
are locked into the management of indexed funds.
We have brought together and summarized the main elements of
this portfolio of proposals, drawing in particular from the proposals
offered by each of the specialist authors at the end of their
respective chapters. Overall, the proposals focus on three primary
routes to change: incentives, competencies and information.
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