At FCLTGlobal, our mission is to conduct research that drives action toward longer-term decision-making across the global investment value chain. To make that goal a reality, we rely on contributions from our Member organizations, which provide direct experience of what works, what doesn’t, and what needs to change in order to realize a longer-term approach to investment decisions.
Each of our research projects is supported by working groups attended by our Members, giving them the opportunity to stay abreast of our current thinking while shaping and contributing to our work. This summer we have hosted several working group sessions to advance the research outlined at the 2018 Focusing Capital on the Long Term Summit.
Below is further detail on these recent meetings: the first, held in London in June, included delegates from leading asset owners and asset managers who discussed long-term practices for communicating about investment risk. The second, held a month later in New York, mapped out the ideal makeup of a truly long-term corporate board of directors.
Long-term risk & opportunities top of mind in London
Investors face the challenge of meeting long-term obligations and maintaining the support of their constituents along the way. FCLTGlobal is responding in part by developing a set of questions that investment committee members can use to guide a long-term dialogue with their risk staff. Members met in London in June, hosted by State Street Global Advisors, to respond to a working draft of a “risk conversation guide,” as well as to share experiences with practices that help them to focus on long-term risk during their own work. The discussion focused on how to:
- Define risk for long-term investors: identifying the purpose of the fund, coordinating fund management with its risk profile, and understanding risk appetite.
- Identify risk: determining the features that represent risk on the long-term pathway.
- Address risk: how do long-term risks create investment opportunities? Looking at risk through the lens of real world factors like carbon footprint or technology disruption.
- Monitor and Measure risk: are risk measurements complementary for long-term investment strategies? Are there better alternatives?
- Organize to manage risk: aligning interests, managing accountability through the use of mandates, and the utility of risk models.
The thoughts and suggestions of our participants in London will help to refine our approach to addressing long-term risks, and also lend greater precision to our guide to risk communications, which will be released later this year.
New York working group explores long-term board behavior
A cross-organizational focus on long-horizon objectives flows from the top down. Members came together at the offices of Wachtell Lipton Rosen & Katz in Manhattan to share insights on the concept of a long-term corporate board, and how to catalyze this sort of organizational mindset. What “long-term” characteristics are, and what prevents these from manifesting into action, are largely still up for debate, but the array of voices in the room shed light onto areas that require further clarity and direction, such as:
- Defining the core elements of a successful long-term Board: identifying the key evidence-based factors tied to long-term success at the Board level
- Roadblocks to long-term action: dissecting the barriers or disruptors preventing Boards from taking a long-term term approach
- Practical ideas that can shift behavior: looking at how high-functioning boards spend their time, developing a calculation tool to evaluate the duration of compensation set by the board for themselves and management, or drafting language for inclusion in corporate governance charters to solidify the Board’s intention to manage for the long-term.
The group built upon the ideas put forward in FCLTGlobal’s recent work, Long-term Boards in a Short-term World, and the experiences and opinions shared on the topic will inform and improve the next phase of our work on long-term board behavior.
Workshops like these give us the chance to engage with our Members, but more importantly give our Members the opportunity to shape FCLTGlobal’s research and impact. We thank all our Members who took part, and especially those who hosted us in London and New York. Looking ahead, we plan to hold several more in the remainder of 2018 and 2019 around our current projects.
Any Member that would like to contribute to FCLTGlobal’s research through our working groups should feel free to contact us. If you’d like to learn more about becoming a Member, please visit our Membership page for information on how to join and participate in reorienting the investment value chain toward the long term.