L-R: Jim Yong Kim, Prime Minister Justin Trudeau, Neethi Bhala, Brian Moynihan, Hiro Mizuno, Mark Wiseman (FCLTGlobal Board Chair), Jean Raby (FCLTGlobal Member), Theresa Whitmarsh (FCLTGlobal Board Member)
In the run-up to the much anticipated G20 Summit in Buenos Aires, amidst chatter of tariffs and tête-à-têtes among world leaders, the World Bank Group and the Argentine government hosted the Investor Forum. The conference is a first-of-its-kind event uniquely positioned to bring together global investors and policy makers to identify steps for increasing long-term, sustainable investments that promote economic growth.
The forum leaned heavily toward action, with people in the room capable of it on a global scale – in attendance were political leaders including Argentinean president Mauricio Macri and Canadian Prime Minister Justin Trudeau, Ministers of Finance from Argentina, Chile, France, Indonesia, the UK’s Chancellor of the Exchequer, joined by some of the world’s largest investors, including Japan’s GPIF and several FCLTGlobal Members.
The ultimate output of the first Investor Forum is the Buenos Aires Call to Action: Shaping the Future of Global Private and Public Investments, a consensus statement which includes language specific to preserving a focus on long-term, sustainable business practices. We believe there are tangible steps that can be taken by all stakeholders present to drive toward this accord.
Properly aligned incentives are among the most critical elements in ensuring that investor partnerships fulfill long-term objectives. Asset owners and the asset managers they partner with often have very distinct horizons and goals for their investments. The contracts between them, or mandates, constitute a mutual mechanism to align managers’ behaviors with owners’ objectives. In order to create incentives that drive long-term value creation for all parties, institutional asset owners can structure mandate terms in a more sustainable fashion, including components like discounted fee structures or finite contract terms, both of which encourage a long-term arrangement. Likewise, asset managers can establish funds with long-term incentives built into them. Both groups can mutually measure and reward progress against such long-term objectives, rather than hold one another accountable for short-term financial benchmarks.
While the actors within the investment community understandably play an immense role in fostering longer-term investments, so too do the regulators who frame the boundaries within which institutional investors function. With this in mind, properly aligned and structured investment stewardship codes that emphasize long-term value creation could be a decisive factor. Such codes, which outline principles which institutional investors are expected to follow, currently exist in 22 national and international jurisdictions and counting. However, most global investors operate across multiple markets and therefore interact with multiple codes on any given day. Harmonizing these various standards would make international investing a more straightforward process, especially with an eye toward longer-horizon investing.
The first Investor Forum illuminated specific paths toward more widespread sustainable investing practices through a focus on deliberate action across the global investment value chain. Our organization is prepared, and eager, to assume our share of this collective responsibility along with all participants present in Buenos Aires. Alignment of goals, standards, and incentives between the global policymakers and business community leaders is a practical way for sustainable investments to become a worldwide norm. The G20 Investor Forum has set the stage by laying important groundwork for economic progress in the years ahead.