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.
Showing posts with label Risk. Show all posts
Showing posts with label Risk. Show all posts
Monday, October 26, 2009
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.
Can we transform our economy from a forward-moving aeroplane to a hovering helicopter without crashing?
This question is from a series of articles about the troubles that lie ahead for the global economy published in the New Scientist last October. The graphic image it conjures up seems to capture the challenge humanity faces this century. Avoiding a crash will be tricky!
The New Scientist elegantly shows that despite technological advances we’re rapidly overshooting our planet’s carrying capacity: the average person is still consuming more of the planet’s resources every decade and we are currently increasing our global population by over 200,000 people a day. Ecologists know that if this continues our population will collapse.
However, the New Scientist offers its readers an optimistic scenario for 2020 based on a "steady-state" economy that is thriving within ecological and political limits set by science and society. There are clues in the scenario about how we’ll get from here to there, but not about how the social and political will to change developed so quickly.
Will the leaders of the G20 nations focus on patching up and redesigning the aeroplane? Or will they take the opportunity the current crisis provides and create genuinely sustainable recovery? As Prince Charles said recently "any difficulties which the world faces today will be as nothing compared to the full effects which global warming will have on the world-wide economy".
The New Scientist elegantly shows that despite technological advances we’re rapidly overshooting our planet’s carrying capacity: the average person is still consuming more of the planet’s resources every decade and we are currently increasing our global population by over 200,000 people a day. Ecologists know that if this continues our population will collapse.
However, the New Scientist offers its readers an optimistic scenario for 2020 based on a "steady-state" economy that is thriving within ecological and political limits set by science and society. There are clues in the scenario about how we’ll get from here to there, but not about how the social and political will to change developed so quickly.
Will the leaders of the G20 nations focus on patching up and redesigning the aeroplane? Or will they take the opportunity the current crisis provides and create genuinely sustainable recovery? As Prince Charles said recently "any difficulties which the world faces today will be as nothing compared to the full effects which global warming will have on the world-wide economy".
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