The guide highlights why asset owners should craft a clear and explicit investment strategy.
The Principles for Responsible Investment (PRI) has today launched new guidance for asset owners to assist them with crafting a long-term investment strategy for a rapidly changing world, entitled Asset owner strategy guide: How to craft an investment strategy.
There are a number of financial and sociological trends that have the potential to impact investment portfolios. These trends include:
- Environmental: Climate change, deforestation
- Economic:Capital flows, market volatility
- Social: Poverty, inequality, food security
- Technological: Cybersecurity, robotics
- Political and regulatory: Geopolitical shifts, increased regulation or government oversight
In addition to these trends, there are additional considerations that asset owners should recognise such as:
- What are more dramatic/disruptive shifts in trends that could occur broadly in the economy (e.g. dramatic lengthening in human lifespan, increasingly sophisticated artificial intelligence)? What would be the impact?
- Where and how is responsible investing manifesting most?
- What are the in-depth trends in themes such as global/regional/country inequality (e.g. income, opportunity, justice)? What trends are already being impacted by the investment community?
- Are the Sustainable Development Goals (SDGs) being considered by companies? To what extent do they influence behaviour.
In order to properly assess these trends, asset owners need to understand their position in the market and the view for the future that they have of their organisation, including their investment approach, an awareness of how the asset owner industry could change in years to come and how they will interact with their beneficiaries.
The guidance also includes recommendations for successfully implementing a strategy, focusing, amongst other considerations, on how to gain support from the board and senior management before communicating the strategy across the organisation.
“We want investors to start thinking about how they can future- proof their investment strategies,” said Kris Douma, director of investment practices and engagements at the PRI. “This includes the need to ensure that their understanding of fiduciary duty reflects current interpretations in order to provide maximum benefits to beneficiaries.”