Cambridge Institute for Sustainability Leadership (CISL)
Taking the long view: A toolkit for long-term, sustainable investment mandates
May 2016 – Short-termism in financial markets has been widely identified as a cause of underinvestment, economic inefficiency and poor decision-making by corporations, that undermines long-term value creation. This report provides a toolkit for investors who wish to design investment mandates that can help shift the investment chain towards responsible, long-term value creation.
Short-termism in financial markets has been widely identified as a cause of underinvestment, economic inefficiency and poor decision-making by corporations, that undermines long-term value creation.
About the report
This report, developed by the Investment Leaders Group (ILG), a network of 10 leading investment managers and asset owners, provides a toolkit for investors who wish to design investment mandates that can help shift the investment chain towards responsible, long-term value creation.
The toolkit
The report provides a toolkit of 10 design features to help investors design or assess investment strategies that can make a particularly strong contribution to long-term responsible and sustainable investment (LTRSI).
Long-term responsible and sustainable investment
As defined by the ILG, LTRSI is "investment that promotes increased long-term value creation by companies and in the economy as a whole, and more sustainable business practices by companies. Investment of this kind is characterised by a clear and disciplined investment philosophy, process and culture, rather than a rigid set of rules or criteria. It focuses principally on long-term factors that determine companies’ earnings, rather than short-term factors that may predominate in determining share prices. Its time horizon is likely to be five years or more. Committed stewardship is an integral part of long-term, responsible and sustainable investment."
Investment strategies
The toolkit includes investment strategies that can contribute to value creation – improving long-term returns for savers and clients, at the same time as contributing to the environment and society in which they operate. It outlines a set of 10 design features which can be adjusted to deliver varying ‘strengths’ of LTRSI in an investment strategy and mandate to suit an asset owner’s particular circumstances. The approach focuses on investment time horizons and the extent to which sustainability factors are embedded in the investment process.
First and foremost the paper addresses active listed equity strategies, both because it forms an important part of asset owners’ portfolios and because it gives investors post-investment rights as share-owners and opportunities to influence company behaviour through voting and ongoing stewardship activities.
Citing this report
Please refer to this report as University of Cambridge Institute for Sustainability Leadership (CISL). (2016, May). Taking the long view: A toolkit for long-term, sustainable investment mandates. Cambridge, UK: Cambridge Institute for Sustainability Leadership.
