Taking into account all the trends uncovered in Step 1: Context, the organisation can begin to determine or realign its vision of how the world will develop, and define or reassert its mission. By doing so, the investment strategy that is developed and the investment decisions that it drives will be aligned with a clearly articulated purpose, and a shared view of the expected investment environment.
Defining an organisation’s mission and agreeing on the vision may require significant time, as it is critical to get full alignment from the board.
Vision of the future
Your vision of the future should encompass how traditional macroeconomic factors are reflected in your investments over time and your organisation’s expectations on:
- society: an interpretation of broad trends from Step 1: Context, e.g. demographics, big data, rise of emerging markets, climate change, tax transparency;
- beneficiaries/customers evolution: how needs and preferences will change for your beneficiaries/customers (e.g. changing expectations on flexibility of pension schemes (especially for defined-contribution plans), shift from demanding solely financial returns);
- asset owner industry: how the role of asset owners will evolve, e.g. changing conceptions of fiduciary duty, long-term vs short-term focus, impact of regulatory changes;
- investment environment transition: how global trends are shaping financial markets and investment expectations.
- “We see the population becoming older, richer, and more focused on the long-term social and environmental impact of their actions. We see the asset owner industry dividing into concentrated big players on one hand and fragmented small players on the other. We see regulations evolving to encourage the asset owner industry to hold financial and other positive impacts for people and/or planet as dual objectives. We see the economy experiencing long-term stagnation as growth in China slows and climate change adversely impacts developing economy outlooks, leading to lower financial returns for extended periods.”
A mission statement puts into words your organisation’s reason to be. An asset owner’s mission includes how the organisation will serve its stakeholders (e.g. beneficiaries/customers, employees, society), as well as an explicit (or implicit) differentiator against industry peers. The freedom the organisation has to formulate a mission statement will vary, e.g. some defined-benefit funds including public pension funds can be tightly restricted and/or regulated, whereas other funds have a wide range of options.
“Securing the financial future and sustaining the trust of California’s educators” (CALSTRS)
“We empower entrepreneurs to build a better world” (FMO)
“We have a strong focus on responsible and sustainable investment, as we consider environmental, social and governance factors create real risks and opportunities for the Scheme, particularly given its long term nature.” (EAPF)
“Our overarching goal should be to achieve the investment returns required for the public pension system with minimal risks, solely for the benefit of pension recipients from a long-term perspective, thereby contributing to the stability of the system. […] By fulfilling our stewardship responsibilities, we shall continue to maximize medium- to long-term equity investment returns for the benefit of pension recipients.” (GPIF)
“Paying pensions today, preserving pensions for tomorrow.” (OPTrust)
“Because pensions are very long-term investments, ERAFP has positioned two concerns at the heart of its governance: preserving intergenerational fairness and overseeing the sustainability of its management. ERAFP’s board of directors therefore ensures that the benefits being paid out today are not detrimental to the interests of tomorrow’s beneficiaries.” (ERAFP)
Topics to consider
|VISION OF THE FUTURE (SOCIETY)||VISION OF THE FUTURE (BENEFICIARIES/CUSTOMERS)||VISION OF THE FUTURE (ASSET OWNER INDUSTRY)|
|VISION OF THE FUTURE (INVESTMENT ENVIRONMENT TRANSITION)||MISSION|
Actions and roles
Project sponsor holds planning session with project lead and board/trustees.
Project lead collects (through interviews and focus groups) views on existing vision and mission, from board/trustees, C-level executives, stakeholders such as beneficiaries/customers and outside experts/thought leaders.
Project team conducts a peer review of vision and mission.
Project sponsor may hold vision and mission workshop/s with key stakeholders. Project team should report on current vision, mission and input gathered.
Project sponsor holds sign-off meeting with board/trustees where board is given opportunity to voice final input, questions, and thoughts regarding vision and mission, before approving.
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How to craft an investment strategy
Asset owner strategy guide: how to craft an investment strategy
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Step 2: Vision and mission