investors still hard to convince on sustainabilityOctober 1999
Mainstream institutional investors remain largely unconvinced that sustainability is beneficial to business, according to a new report.
The study, from the sustainable development body Forum for the Future, says analysts and investors ‘have still to be persuaded that they have anything to gain’ by investing in sustainable businesses. It claims this is due to three factors:
the ‘inadequacy’ of environment-related information provided by companies
the current perception of the environment ‘as not being relevant to investment analysis’
the inability of investors to evaluate environmental information accurately.
It claims ‘unstandardised and inconsistent’ environmental reporting is ‘generally of very little use to investors’ and that until companies overcome their wariness of the potential consequences of fuller environmental disclosure, mainstream investment institutions ‘can hardly be expected to show the interest the importance of this issue would justify’.
The report, Blind to Sustainability, adds that robust empirical evidence to prove the link between sustainability and financial performance is currently ‘scarce’. This means that ‘corporate hopes to be rewarded for superior environmental performance may prove somewhat unrealistic’.
It concludes that the most promising way to convince investors of the need to take sustainability into account is to work through pension funds, which are the most important clients of fund managers.
‘If pension funds start generating demand for environment-related research and products on a larger scale, fund managers and analysts will follow’, it argues.
Research for the study was undertaken during the first year of Forum for the Future’s Capital Futures Project, set up in 1998 to encourage mainstream UK financial institutions to take account of sustainability in their investment policies.
The project is directed by Marta Suranyi, a former financial analyst at Morgan Stanley.
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