Finance industry resting on its laurels

Sustainability is defined as the capacity to endure. Sustainability is not just the consideration of environmental or social and governance considerations.

It is not a negative screen. It is so much more than climate change, so much more than corporate engagement. Sustainability is the system and the ability to continue.

Princeton University professor and sociologist, Robert Gutman, said: “Every profession bears the responsibility to understand the circumstances that enable its existence.”

This should be a call to action for the finance industry, which has rested on its laurels; it’s rested on its low barriers to entry, high fees and complex language that has created enduring principal/agent problems that restrict transparency and accountability.

All participants in the finance industry should take heed. Simply, if you want to endure then you should consider your role, the industry and its purpose, through a sustainability lens.

After nearly 10 years of reporting on sustainability, the finance industry is finally waking up.

conexust1f.flywheelstaging.com is an investment publication. It covers broad issues relating to institutional investment including investment strategy and implementation, macro-economic conditions and asset class specific solutions.

We have been writing about sustainability since the publication’s inception in 2008, because we see environmental, social and governance issues as a central theme for the world in which we live, both now and, importantly, in the future – and that’s true if you’re a pension fund member, a pension fund executive, a provider of service to that industry, or a company in which the industry invests.

This is not about tree-hugging, but a sensible and robust investment strategy and a logical, thematic, holistic world view. The finance industry is inward looking, it’s time to look out.

In this regard, I consider my job will be done when there is no ESG alpha but it is priced into markets and embedded in the process of managers and asset owners.

We are very proud to be partnering with the PRI on a special publication to celebrate the PRI’s 10th anniversary and look at the achievements of the past 10 years, and challenge the industry to move forward.

The magazine looks at big picture issues such as the purpose of finance – which is not to make money, but to serve the real economy – the achievements of the PRI, and the role institutional investors can play in financing solutions to global challenges such as climate change, social injustice, poverty and inequality.

In this issue we also highlight through case studies the asset owners that are leading the way in ESG integration – and how they hold managers to account on ESG will be a key development in the next 10 years.

We celebrate asset owners, and believe that building strong buy-side organisations is the key to much-needed change in the finance industry, change that will allow investors to focus investments on the long term, and better align decisions with the needs of their members and stakeholders.

In order to do this, asset owners need to take stock of their internal organisations, pay attention to governance and decision making, hire good internal teams, invest directly, reduce the number of external providers, integrate ESG into investments and be conscious of costs. All are issues of sustainability.

An e-mag of this special print edition will be made available on conexust1f.flywheelstaging.com following the PRI in Person conference next week.