Investing For The Long-Term: Now For The Hard Part.....

“Managing risks and rewards at the systems level (environmental, social, financial) while at the same time achieving competitive returns at the portfolio level is among the most difficult challenges facing corporate and asset owner fiduciaries/managers.”

FROM “LONG-TERM MATTERS: ELEPHANTS IN THE SUSTAINABILITY ROOM”RAJ THAMOTHERAM AND ED WAITZERIPE MAGAZINE, NOVEMBER 2017

A Trilogy on Fostering ‘Long-Termism’

Fostering ‘long-termism’ is not a new topic for this publication. In fact, this Letter is the third of a trilogy, following last May’s and September’s offerings. The May Letter set out the value of ‘long-termism’ and identified three barriers to it becoming the dominant corporate and institutional investor mindset. The Letter provided strong evidence that, properly executed, the steady application of a ‘long-termism’ mindset to investing actually produces superior rather than just competitive portfolio returns.

The September Letter provided a practical ‘to do’ list for asset owners to foster ‘long-termism’ inside their own organizations based on the June ICPM Forum discussions on the topic. Items on the list included raising asset owner board effectiveness, rethinking asset owner HR policies, and initiating outreach strategies to broader groups of stakeholders. The Letter also offered a progress report on an array of collective actions underway to foster ‘long-termism’. Specific organizations mentioned in some detail were World Economic Forum, Focusing Capital on the Long-Term, Principles for Responsible Investment, CFA Institute, and the Taskforce on Climate-Related Financial Disclosures.     

All this leads to the goal of this Letter, which is to argue that the move to ‘long-termism’ becoming the dominant mindset has, in Churchillian terms, only reached the end of the beginning. For many corporate, asset owner, and investment management organizations, the hard part still lies ahead.