Continuing our work on the challenges of short-termism, the Principles for Responsible Investment (PRI) and UN Global Compact have launched the second edition of Coping, shifting, changing: corporate and investor strategies for managing market short-termism.
While the topic of market short-termism is not new, it is certainly of high importance given that investor and corporate behaviours associated with it are still very much a part of the global economy.
The PRI and UN Global Compact rolled out the first version of Coping, shifting, changing in 2014. The central premise of the report was that companies could be long-term even in a short-term world, offering practical recommendations on how to achieve this.
This edition responds to feedback that investors could, and should, do more to support companies on those recommendations, building on work by other organisations also tackling this problem. It presents three main strategies, each including recommendations focused on measures that companies can adopt to address the problems caused by market short-termism, and actions that investors can take to support companies in those efforts.
The report highlights that companies that operate with a long-term outlook have consistently outperformed their industry peers since 2001 across almost every financial measure including revenue, earnings and job creation. Similarly, it notes that strong corporate performance on environmental, social and governance (ESG) factors correlates positively with improved cost of capital and financial performance. However, it has been found that many companies still forego efforts to create long-term value because of pressure to meet short-term objectives.
Coping, shifting, changing considers the challenges associated with market short-termism through an investor and corporate perspective, advocating that to get to the crux of what is driving short-term thinking and behaviour (and address these issues), both sides must take action collaboratively, not in silos. The report can be downloaded here.