LEAD, PRI Introduce Strategies for Managing Impacts of Investor Short-Termism

Rome, May 20, 2014 /3BL Media/ – Overcoming short-termism, understanding the value of sustainability and communicating with investors took center stage at “Realizing Long-Term Value for Companies & Investors”, a Global Compact LEAD meeting held today in Rome. The event marked the launch of a joint report by LEAD and the Principles for Responsible Investment (PRI), Strategies for Managing the Impacts of Investor Short-Termism on Corporate Sustainability.

Short-termism in investment markets is a major obstacle to a company’s ability to fully embed sustainability in strategic planning and capital investment decisions. In asking what companies can do to reduce the negative impacts of short-termism on their long-term strategies and investments, the new report outlines three broad corporate strategies:

• Cope with prevailing short-termism in their existing investor base (in the near-term)
• Shift to a more long-term oriented investor base (in the medium-term)
• Support wider systemic change in the capital markets (over the medium to long-term)

“Short-termism in financial markets poses a hurdle for business to embrace sustainability more actively,” said Georg Kell, UN Global Compact Executive Director. “The adoption of ‘coping, shifting and changing’ strategies by companies can go a long way toward helping investors support long-term value creation and sustainable growth.”

During interactive discussions on short-termism and implementing “coping, shifting and changing” strategies, LEAD company representatives from investor relations and corporate sustainability backgrounds detailed their experiences in working to alleviate the effects of investor short-termism on their sustainability goals and encourage investors to undertake strategies and investments that enable long-term business growth. 

Global Compact LEAD, a platform for companies with advanced corporate sustainability practices, has led efforts to drive the conversation about the challenges of short-termism and opportunities for change. LEAD’s Realizing Long-Term Value for Companies & Investors project aims to help companies understand and communicate the financial value of sustainability, while the report will serve to monitor and track the implementation of strategies to overcome short-termism.

In addition, participants attended sessions on understanding and communicating sustainability value to investors, with presentations from PRI, Pirelli, and ENI. While the business case for sustainability is increasingly understood by both companies and investors, only 38 percent of companies believe they are able to quantify the financial benefits of sustainability integration.

To complement LEAD’s work on Realizing Long-Term Value, the Value Driver Model was developed to assist Global Compact participants to identify and quantify the impact of sustainability strategies and investments on revenue growth, resource efficiency and risk management. While the reported financial performance of any firm is the result of a complex array of internal and external factors, the Value Driver Model’s goal is to provide a few key metrics that illustrate how a sustainable business strategy contributes to overall performance.

For many companies whose sustainable business strategies are already yielding tangible financial benefits, employing the Value Driver Model can represent a good first step on the path toward deepening investor interest in sustainability as a source of business value. For firms seeking to increase the positive financial impact from their sustainable business strategies, the Value Driver Model can be a useful tool to align and motivate the organization.

• Download Strategies for Managing the Impacts of Investor Short-Termism on Corporate Sustainability
• View the Value Driver Model, toolkit and case studies
• Learn more about Global Compact LEAD and its strategic linkages to responsible investment