REPORTS

FCLTGlobal conducts original research on the causes of short-termism and works to test practical solutions.

Understanding the investment value chain

23/01/14

Short-term decision making runs counter to individual savers needs. Much of the capital in the chain originates with savers whose interests are long-term. Yet today few individuals’ directly invest their own savings into markets. Rather, the majority of capital works its way through the hands of multiple financial market participants before individual savers realize some return from the net cash received on their effective investments in corporations, multiple links down the chain from them. Unfortunately as capital weaves its way through this system, it is increasingly subjected to value-destroying short-term forces and the savers’ long-term interests are lost.

Metrics, measures and approaches that better reflect these long-term interests across the value chain have the power to change the short-term actions of companies and investors. Given their roles in the investment value chain, institutional investors and corporate boards have not only the duty, but the power to act as champions of longterm thinking. Changing the actions of these two groups has the potential to influence widespread change, ultimately resulting in a virtuous circle that will benefit companies, shareholders and society.

Value Chain Diagram