Sustainability

There is a contradiction in the way that many long-horizon asset owners behave. On one hand, they are increasingly concerned about the externalities imposed on wider society by the companies they own. But on the other, they tend to ignore the social costs imposed by the short-horizon strategies that they employ such as momentum and tracking error constraints. The transmission mechanism for this social cost is via asset mispricing, which leads to capital misallocation and incentives for CEOs to focus on short-term share price maximisation.

The new chief executive and president of the CFA Institute, Marg Franklin, completed her first 100 days in the job last week and already she’s made an impact. Amanda White spoke to her about the organisation’s influence in the decade ahead.