In a recent article, ‹Investments & Pensions Europe› assesses current trends in the Swiss institutional investment market with regard to the integration of environmental, social and governance (ESG) criteria. The article is based on an interview with Ivo Knoepfel, managing director of onValues.
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«Fundamental shift in ESG»
Recent investments by APG, PGGM and TIAA-CREF, among others, have put microfinance investments on the radar screen of pension funds looking for innovative ways to further diversify their portfolio. But a lot of questions remain about the viability of these investments, their long-term risk and return profile, and the capability of the microfinance market to absorb growing pension fund investments. To understand how leading European pension funds already invested or considering investing in microfinance assess the current state and future prospects of microfinance, onValues interviewed pension funds from seven European countries on behalf of the World Microfinance Forum Geneva. The report summarising results from the survey was released today in Geneva.
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«Ends meet - Current state and future prospects of European pension funds’ investments in microfinance»
Increasing numbers of institutional investors are going on record to state that they believe that ESG issues will have a material impact on their financial performance. However, some believe that the way asset owners are structured, including their internal governance and how they measure and pay external asset managers, may be obstacles to truly long-term behaviour.
In June 2009 onValues facilitated a workshop for investment professionals and academics on this very topic on behalf of Mistra, The Foundation for Strategic Environmental Research. The workshop addressed the challenges of the asset owner-manager relationship in two stages:
1. Understanding how investors take decisions, how they are influenced by prevailing beliefs, and which behavioural biases are most dangerous for the long-term investor; 2. Presenting and refining better long-term models for the asset owner-manager relationship
Workshop participants expressed strong opinions on the changes needed to encourage long-term investment behaviour, including:
- Measuring asset managers' financial performance over rolling periods of at least three years
- Putting a greater emphasis on the manager selection process: asset owners should spend more time evaluating the quality of processes and people at the asset manager using transparent, systematic criteria
- Above all, the owner needs to give his managers the feeling that they are trusted: the ‹climate of fear› often found in institutional asset managers is highly damaging to long-term investment
The detailed conclusions of the workshop can be found in the report below.
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«Winning the long-term game – new insights into asset owners' behaviour and their interactions with asset managers»
In collaboration with the German NGO Germanwatch, onValues this week published a report that assesses the observed and expected impacts of the current financial crisis on the financial industry’s efforts to integrate ESG and climate change-related issues in investment decisions. The report was distributed at this week’s Bonn climate change talks. Over the short term the authors expect set-backs in the industry’s efforts in this area. These set-backs will be particularly pronounced if the crisis persists for a longer time period, i.e. if financial markets do not stabilise by the end of 2009. The Copenhagen Climate Conference in December 2009, in combination with an ongoing financial crisis, could become the ‹make or break› tipping point for the market’s continued efforts to integrate ESG and climate issues, at least for the short- to mid-term. The mid- to long-term prospects for integration, on the other hand, are seen as positive given a series of strong underlying trends, among others the change in attitude of the US market and the increasing manifestation of the financial implications of environmental and climate change impacts.
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«Observed and expected impacts of the current financia crisis […]»