This blog was launched nine months ago to track progress in building more sustainable capital markets. Now seems a good time to reflect on this year’s developments. From a UK perspective, which are the most significant signals of future change?
Here is my list of the key trends from 2009:
• Civil society starts to demand a more accountable finance sector
Eg. Anger at remuneration levels, Deepening of NGO research and campaigns
• Politicians, regulators and industry leaders increase support for good governance of asset owners and more responsible ownership of assets
Eg. Lord Myners’ emphasis on “ownerless corporations”, The Pensions Regulator’s governance campaign, the Walker Report’s Stewardship Code recommendations, Personal Accounts Delivery Authority Investment Consultation responses
• Modern green and ethical retail investors and their advisers seek positive ways to make money and make a difference with some of their investments
Eg. YouGov research for National Ethical Investment Week 2009, Conservatives commit to “Green ISAs”
• Stock exchanges deepen their focus on support for sustainability
Eg. World Federation of Stock Exchanges publishes interactive “Exchanges and Sustainable Investment” report, UN hosts sustainable stock exchanges event
• Bonds and other financial instruments for sustainable infrastructure move up the agenda
Eg. HSBC’s Vaccine Bond, second and third issues of World Bank green bonds, the Climate Bonds Initiative
In twelve months time, will these still seem like the key developments in 2009?
Showing posts with label Corporate governance. Show all posts
Showing posts with label Corporate governance. Show all posts
Sunday, December 20, 2009
Monday, October 26, 2009
Capital and Control
The flow of reports and comments in the run-up to both Copenhagen and the final recommendations of the Walker Review continues this week.
“Catalysing low-carbon growth in developing economies: Public Finance Mechanisms to scale up private sector investments in climate solutions” is the latest on “capital” for the low carbon economy. It was launched today by UNEP in partnership with an impressive range of pension, investment and insurance organisations.
Meanwhile, on effective shareholder ownership and “control”, I was struck by this piece “not more regulation, more Responsibility” from Colin Melvin of Hermes in Sunday’s Independent.
“Catalysing low-carbon growth in developing economies: Public Finance Mechanisms to scale up private sector investments in climate solutions” is the latest on “capital” for the low carbon economy. It was launched today by UNEP in partnership with an impressive range of pension, investment and insurance organisations.
Meanwhile, on effective shareholder ownership and “control”, I was struck by this piece “not more regulation, more Responsibility” from Colin Melvin of Hermes in Sunday’s Independent.
Tuesday, October 13, 2009
Reforming Ownership and Capital Markets
UKSIF has recently submitted responses to the Walker Review of Corporate Governance of UK banks and other financial institutions and to HM Treasury's 'Reforming Financial Markets' consultation. We have also responded to the second consultation in the 2009 Review of the Combined Code. All three responses can be found here.
Monday, August 17, 2009
No more business as usual
I have just contributed an opinion piece "Responsible investment: No more business as usual" to the Ethical Corporation website.
It is based on my article in Green Alliance's pamphlet "From crisis to recovery: New economic policies for a low carbon future".
Ethical Corporation is doing a series of opinion pieces from members of their editorial advisory board - of which this is just one. FTSE's Will Oulton, for example, has contributed "Green investment grows up".
It is based on my article in Green Alliance's pamphlet "From crisis to recovery: New economic policies for a low carbon future".
Ethical Corporation is doing a series of opinion pieces from members of their editorial advisory board - of which this is just one. FTSE's Will Oulton, for example, has contributed "Green investment grows up".
Thursday, July 16, 2009
Walker Review consultation document published
Recommendations from the Walker Review have been published in a consultation document today.
UKSIF will be responding over the summer to this and to last week’s HM Treasury report “Reforming financial markets”.
Do please respond to these too. Deadlines are 30 September (HMT) and 1 October (Walker).
UKSIF will be responding over the summer to this and to last week’s HM Treasury report “Reforming financial markets”.
Do please respond to these too. Deadlines are 30 September (HMT) and 1 October (Walker).
Tuesday, April 28, 2009
Beyond regulation: PIRC and Aviva Investors on ownership and capital market reform
I am more and more convinced that apparently robust interventions like improved regulation will deliver effective ownership and sustainable capital markets only if there is associated cultural change. This is not an argument against regulation – but it is an argument against regulation alone.
It is good to see a range of proposals now coming forward on responsible ownership and capital market reform – but one test is how they will change cultures and norms so that new behaviours are “what we believe in doing around here” rather than “what our compliance department says we have to be seen to do”.
Anita Skipper, Corporate Governance Director at Aviva Investors and Alan MacDougall and his colleagues at PIRC have both just published thoughtful contributions to the debate.
Introducing PIRC’s “Manifesto for corporate governance and capital market reform”, Alan says “Too many institutions fail to take their ownership responsibilities seriously, therefore post-crisis reform must consider their role too. There can be no return to business as usual.” The manifesto aims to “stimulate debate and spark further ideas, but most importantly to begin the process of pulling together ... radical but realistic policy reforms”. PIRC is seeking comments on its suggestions.
Anita’s piece “Corporate governance and the economic crisis: what can shareholders do differently?” appears in Aviva Investors’ The Investors Journal (Volume 3). (NB. To get access, just click either “I am a private investor” or a more appropriate category.)
She highlights barriers to good governance including “Lack of client interest”, “Human behaviour” and “Managing conflicts of interest”. Her solutions include “More client focus on governance” and “Focus on culture”.
Importantly, she says “With the right corporate culture in place, companies, boards and fund managers are more likely to make the “right” decisions, irrespective of any weaknesses of accountability, regulation, accounting standards and conflicts of interest.”
It is good to see a range of proposals now coming forward on responsible ownership and capital market reform – but one test is how they will change cultures and norms so that new behaviours are “what we believe in doing around here” rather than “what our compliance department says we have to be seen to do”.
Anita Skipper, Corporate Governance Director at Aviva Investors and Alan MacDougall and his colleagues at PIRC have both just published thoughtful contributions to the debate.
Introducing PIRC’s “Manifesto for corporate governance and capital market reform”, Alan says “Too many institutions fail to take their ownership responsibilities seriously, therefore post-crisis reform must consider their role too. There can be no return to business as usual.” The manifesto aims to “stimulate debate and spark further ideas, but most importantly to begin the process of pulling together ... radical but realistic policy reforms”. PIRC is seeking comments on its suggestions.
Anita’s piece “Corporate governance and the economic crisis: what can shareholders do differently?” appears in Aviva Investors’ The Investors Journal (Volume 3). (NB. To get access, just click either “I am a private investor” or a more appropriate category.)
She highlights barriers to good governance including “Lack of client interest”, “Human behaviour” and “Managing conflicts of interest”. Her solutions include “More client focus on governance” and “Focus on culture”.
Importantly, she says “With the right corporate culture in place, companies, boards and fund managers are more likely to make the “right” decisions, irrespective of any weaknesses of accountability, regulation, accounting standards and conflicts of interest.”
Thursday, April 23, 2009
An opportunity for accountable capitalism
Government proposals on financial market reform will be published before the summer, said the financial stability section of yesterday’s budget report.
I hope these take on board the recommendations in a recent paper by David Pitt-Watson and his fellow authors of “The New Capitalists”. “Towards an Accountable Capitalism” has been published in a couple of versions – as a “Private Sector Opinion” by the International Finance Corporation’s Global Corporate Governance Forum and as a paper for IPPR’s Tomorrow’s Capitalism programme.
It highlights that “a successful economy is not just about the tensions between two separate poles: regulation or market. An economy which works effectively is like a political system which works effectively: It has checks and balances, accountabilities and responsibilities, information flows and cultures. Of course regulation is important. But there are five central principles beyond regulation on which a successful financial system depends. These are:
I hope these take on board the recommendations in a recent paper by David Pitt-Watson and his fellow authors of “The New Capitalists”. “Towards an Accountable Capitalism” has been published in a couple of versions – as a “Private Sector Opinion” by the International Finance Corporation’s Global Corporate Governance Forum and as a paper for IPPR’s Tomorrow’s Capitalism programme.
It highlights that “a successful economy is not just about the tensions between two separate poles: regulation or market. An economy which works effectively is like a political system which works effectively: It has checks and balances, accountabilities and responsibilities, information flows and cultures. Of course regulation is important. But there are five central principles beyond regulation on which a successful financial system depends. These are:
- That the entities in it are responsible for their actions.
- They will be responsible if they are accountable.
- Those who call them to account will need relevant information.
- That information must be independently prepared.
- And just as a healthy political system hinges on the scrutiny of vigilant citizens, a successful financial system will need the oversight of vigilant market participants."
Regulation alone will not deliver tomorrow’s sustainable capital markets. “Towards an Accountable Capitalism” offers an important steer on much of what is needed as well.
Monday, March 30, 2009
Robustness and Revival
Key points in the article “Revival requires a broad spread of demand” in last Monday’s Financial Times might have come from a member of the Network for Sustainable Financial Markets, the Marathon Club or indeed UKSIF. Instead, the piece was by Kemal Derviş, until recently head of UNDP and a former Turkish government minister.
The points were:
“A central problem in many markets has been short-termism and herd behaviour.”
“Part of the fundamental rebalancing will have to involve a regulatory framework and corporate governance that ties rewards to longer-term performance.”
“The crisis should teach us … not to underestimate the potential damage from events deemed unlikely or hard to predict. The costs of the financial crisis may pale in comparison to some of the long-term risks attached to irreversible global climate change, pandemic diseases and nuclear weapons proliferation.”
“A crisis can also be an opportunity for fundamental improvement. If this one teaches us that robustness is as important as efficiency in human affairs, it will have been such an opportunity.”
Yes, Yes, Yes and Yes!
The points were:
“A central problem in many markets has been short-termism and herd behaviour.”
“Part of the fundamental rebalancing will have to involve a regulatory framework and corporate governance that ties rewards to longer-term performance.”
“The crisis should teach us … not to underestimate the potential damage from events deemed unlikely or hard to predict. The costs of the financial crisis may pale in comparison to some of the long-term risks attached to irreversible global climate change, pandemic diseases and nuclear weapons proliferation.”
“A crisis can also be an opportunity for fundamental improvement. If this one teaches us that robustness is as important as efficiency in human affairs, it will have been such an opportunity.”
Yes, Yes, Yes and Yes!
Friday, March 20, 2009
Investors as Owners need to tame the “Perfect Storm”
The role of investors as owners of failing financial institutions moved centre stage at the 2009 NAPF Investment Conference last week.
In his speech, FSA Chief Executive Hector Sants issued a very welcome call on investors to shift the balance of their interests towards their ownership responsibilities. He said “It is critical to recognise that the principal responsibility for managing firms responsibly remains with the management of the firms and that shareholders are the principal mechanism for holding these managers accountable. Shareholders going forward, have a duty, an obligation to make that oversight role more effective.” And he questioned “if there had been more effective and collective shareholder intervention whether the financial crisis we are witnessing would have been as severe”.
Sants said “As owners we would encourage you to focus on four issues: governance, risk management, business strategy and the issue of compensation.”
A key issue is how investors interpret issues of risk and strategy.
Yesterday, the UK Government Chief Scientist Professor John Beddington gave an insight on this. He said the looming crisis of food, energy and water shortages by 2030 would match the current one in the banking sector and result in a “perfect storm”, according to the BBC.
2030 is only 21 years away – as far forward as 1988 is back. Today’s 45 year olds may not even be drawing the pension that they are investing for today while Sir Fred Goodwin will be a mere 71 year old, presumably with many years of pension still before him.
For genuinely sustainable and long-term investment, investors oversight of risk management and business strategy needs to think this far ahead and beyond – and to protect the wealth generating capacity of the global economy as a whole not just of the individual firm.
The Walker Review of the role of institutional shareholders in corporate governance needs to step up to the challenge of encouraging this level of farsightedness.
In his speech, FSA Chief Executive Hector Sants issued a very welcome call on investors to shift the balance of their interests towards their ownership responsibilities. He said “It is critical to recognise that the principal responsibility for managing firms responsibly remains with the management of the firms and that shareholders are the principal mechanism for holding these managers accountable. Shareholders going forward, have a duty, an obligation to make that oversight role more effective.” And he questioned “if there had been more effective and collective shareholder intervention whether the financial crisis we are witnessing would have been as severe”.
Sants said “As owners we would encourage you to focus on four issues: governance, risk management, business strategy and the issue of compensation.”
A key issue is how investors interpret issues of risk and strategy.
Yesterday, the UK Government Chief Scientist Professor John Beddington gave an insight on this. He said the looming crisis of food, energy and water shortages by 2030 would match the current one in the banking sector and result in a “perfect storm”, according to the BBC.
2030 is only 21 years away – as far forward as 1988 is back. Today’s 45 year olds may not even be drawing the pension that they are investing for today while Sir Fred Goodwin will be a mere 71 year old, presumably with many years of pension still before him.
For genuinely sustainable and long-term investment, investors oversight of risk management and business strategy needs to think this far ahead and beyond – and to protect the wealth generating capacity of the global economy as a whole not just of the individual firm.
The Walker Review of the role of institutional shareholders in corporate governance needs to step up to the challenge of encouraging this level of farsightedness.
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