Industry Voice: Is engagement more powerful than exclusion in public markets?

See why engagement rather than exclusion may be a better way for investors to influence long-term change at companies

clock • 1 min read
Industry Voice: Is engagement more powerful than exclusion in public markets?

The focus on sustainability across both the investment industry and around the corporate world has intensified significantly in recent years. One thing that may be driving this is the recognition that investment horizons have become too short. We can measure this empirically: In the 1960s, the average holding period for stocks listed on the NYSE was seven years; it is now around six months. 1 We can also observe it anecdotally: Again and again we see an obsession with quarterly results. However, what happens in, say, the next six months has almost no bearing on sustainability, which concerns itself with long-term investing.

There is also growing concern that short-term-oriented corporate behavior, driven perhaps by short term-focused investors, is creating — or at least exacerbating — social or environmental stresses that threaten to undermine the very system in which they operate. This is not a purely altruistic concern. It is also a matter of self-interest. If we don't pay attention to the health of the ecosystem, our place in it becomes more vulnerable. We become like birds feathering our nests while ignoring the forest fire that threatens to engulf us.

So how best, in our capacity as an investor in public markets, can we play our part in creating a more sustainable future? Is exclusion the answer?

 

 

 

Endnotes

1 Reuters, https://www.reuters.com/article/us-health-coronavirus-short-termism-anal/buy-sell-repeat-no-room-for-hold-in-whipsawingmarkets-idUSKBN24Z0XZ

 

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