Implement ESG and think long-term, says CFSGAM
Investment firms must guard against 'short-termism' and embed environmental, social and governance (ESG) issues into their decision-making processes, says Colonial First State Global Asset Management (CFSGAM) head of responsible investment Amanda McCluskey.
CFSGAM yesterday released its fifth annual responsible investment report which outlines how each of its investment teams is applying the six principles within the United Nations Principles of Responsible Investment.
"The investment teams across our global business have now fully integrated ESG into every single one of their investment strategies. It's not about niche strategies that sit off to the side - this is mainstream and core to our investment beliefs," McCluskey said.
"ESG issues are material and relevant because they help us better understand risk, they give us insight into the growth opportunities for companies, and they allow us to assess the quality of management within a company," she added.
It is important for companies to resist the short-term thinking that dominates investment markets, said McCluskey. She singled out Unilever for praise, because it only releases long-term forecasts to the market.
"The finance sector in many ways is really driving the short-termism of the market. Average holding periods of companies have gone down from seven years to seven months. Seventy per cent of trades on the New York Stock Exchange are now intraday trades," she said.
CFSGAM is also very active when it comes to encouraging companies to improve their environmental and safety record, said McCluskey.
She cited a case study in the report involving Anglo Gold Ashanti, a large gold miner with 20 operations globally, where engagement from CFSGAM had contributed to better safety standards - with fatalities falling by 59 per cent over the past five years.
"If a company continues to progress and steadily improve its safety and environmental performance, then all stakeholders will benefit. If we can play a role, however modest, as a minority shareholder, then the engagement will be time well spent," said the report.
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