G20 investor group wants reform

Investors have called on policymakers to pay more attention to infrastructure reform and increase incentives for investment at a new, collaborative investor forum at the G20 leaders’ summit.

The investor forum is a joint public-private sector initiative to foster sustainable development and try to right the wrongs of globalisation.

At the G20 summit, some of the world’s most influential institutional investors, with collective assets under management of $20 trillion, travelled to Buenos Aires to discuss solutions with policymakers.

In the first ever G20 Investor Forum hosted by the World Bank and the government of Argentina, senior executives from Caisse de dépôt et placement du Québec (CDPQ), Ontario Teachers’ Pension Plan (OTPP) Japan’s Government Pension Investment Fund (GPIF) Washington State Investment Board, BlackRock, Aviva and many others called on policymakers behind closed doors to lead and collaborate to help build long-term, sustainable investment strategies.

“There are relatively few opportunities for the very highest level dialogue between the public and private sectors at a global level, and it was an eye-opening experience seeing how much there is to discuss,” said Svetlana Klimenko, the World Bank’s lead financial management specialist of operations policy and country services.

Klimenko co-curated the forum and spent a year compiling a packed agenda drawn from interviews with 34 global investors.

A call for policy leadership to help increase infrastructure investment resounded loudest. Investors explained that they have money to deploy and would rather invest in infrastructure than bonds. But they need government leadership and support via regulatory reform and market mechanisms that increase incentives and remove barriers.

“At the moment there aren’t enough big projects; many aren’t structured properly and need de-risking,” said Robert Eccles, Visiting Professor of Management Practice at Said Business School who helped compile the agenda.

In a day fittingly interrupted by two power cuts as the Buenos Aries grid stumbled under its daily load, investors said they needed support in emerging markets most.

Here, policy needs to help build and develop capacity, and investors need blended finance and guarantees.

In addition, political leaders need to write new rules and regulations to drive a sustainable economy.

None more so than introducing relevant pricing of CO₂emissions, according to Niklas Ekvall, chief executive officer of Sweden’s AP4 where low-carbon investments date from 2012.

“Political decision-makers’ ability and decisiveness to create broad international accords and rules will be entirely decisive in steering towards more sustainable development,” he said sounding a hopeful note that policy leadership will materialise.

“Investors’ assessments of both risks and opportunities are based on an expectation that the political system will succeed in taking its responsibility.”

Indeed, driving new policy and regulation is an area where Eccles also believes investors ultimately wield real influence.

“Can investors influence Trump? No,” he said. “But the institutional investment community can influence central banks, regulators and accounting standards bodies.”

And the initiative has been enthusiastically endorsed by busy executives prone to forum fatigue.

“It is gratifying that AP4 has been invited to participate in the G20 Investor Forum. We are happy to contribute with our experience in order to promote long-term sustainable investments,” Ekvall said.

Avoiding distracting sprints

Similarly Theresa Whitmarsh, executive director of the $132 billion Washington State Investment Board, backed a collaborative approach.

“My belief and hope is that improved cooperation across the value chain of government agencies, companies, asset owners and asset managers will lead us collectively to focus on long-term sustainable growth strategies as opposed to distracting sprints toward short-term performance targets,” she said.

“The connection between prudent long-termism and responsible sustainability is gathering momentum globally, and this linkage was evident at the G20 meetings.”

There is also a belief that the setting and level of collaboration will lead to action.

“The discussions held in Buenos Aires are aimed towards making an impact and taking action on the important topics at hand, rather than just having high-level conversations,” said Sarah Williamson, chief executive of FCLTGlobal, a not-for-profit organisation that focuses capital on long-term investment.

Argentina made financing sustainable development and leveraging private sector capital key themes of its G20 presidency, but it’s not clear if the forum will extend this focus to other G20 meetings.

“We’ve had quite a lot of positive feedback from participants. Our objective is to continue and grow, but for now we are consolidating,” says Klimenko.

An important next step will be publishing a call to action, detailing the concrete decisions and recommendations from the forum and follow-up sessions via committees or working groups. Klimenko expects other events and collaborations to focus on the agenda’s themes of infrastructure and long-term sustainable investment.

“We don’t’ want to talk shop. We want to see things happen,” Eccles said.