LONDON | On the day the European Central Bank lent 800 euro zone banks €529.532 billion via its second 3-year long-term refinancing operation, hopes that credit to the private sector will increase were high. The central bank’s aim Wednesday was to restore capital flows in the region and clear the way for confidence to make a comeback to the wider economy.
The UK Sustainable Investment and Finance Association UKSIF chose the same date to call for effective transparency and responsible procurement, as it believes investors need long-term strategies of capital allocation rather than short-term, riskier profits. UKSIF pointed at pension funds and plan sponsors as the ones to drive improvements in the investment chain.
In the opinion of Penny Shepherd MBE, UKSIF Chief Executive,
“The turbulence of the last few years has highlighted the urgent need to fix the broken investment chain […] We need to change the rules of the game for the better. Measures such as encouraging leadership by corporate pension funds, implementing and monitoring responsible investment clauses in investment management agreements, improvements to financial literacy and embracing effective transparency throughout the chain are among the important areas to focus on.
“A number of mainstream investors would also welcome a move away from quarterly reporting to time-scales that better reflect long-term value creation.”
The British sustainable investment sector defended ‘genuine long-term relationships between companies and investors’. It highlighted, too, how public opinion and the mood within the investing community are increasingly at one in worrying about executive bonuses, mark-to-market accounting or carbon prices as proof that
“the basic problem [is] that markets tend to reward short-term behaviour.”
UKSIF has over 260 members including pension funds and major investment managers managing over £5 trillion of assets. On March 22, it will release the Kay Review, an independent review by economist John Kay that investigates whether stock markets push UK-listed companies into taking a short-term approach to business.