NSFM opinion: WEF on Transition to Sustainable Investing

Frank Jan de Graaf and Keith Johnson write: One of the most important, yet least reported, initiatives coming out of the World Economic Forum (WEF) meeting in Davos this year is a renewed focus on sustainable business and investment practices. The WEF issued a white paper, entitled "Accelerating the Transition towards Sustainable Investing." A copy of the report is available here. It is well worth reading.

Among the most helpful aspects of the report are its analysis of current obstacles to faster mainstreaming of sustainable investing and its discussion of next steps for all stakeholder groups.  Practical actions are laid out for asset owners, asset managers, companies, accounting bodies and others.

The WEF highlights principles long emphasized by participants in the Network for Sustainable Financial Markets (NSFM). For example, it confirms that long-horizon investors can make use of ESG analyses in ways that are less relevant to shorter-horizon investors.  It also identifies the effective management of environment issues, customer relations, reputation, human capital and governance practices as among the factors that are central to long-term financial success. Of particular note is the WEF's deliberate selection of the term "sustainable investing" rather than "responsible investing."  The report explains that "sustainable" is better understood by key audiences than "responsible." (This choice of terminology notwithstanding, the report also observes that both terms have essentially the same meaning.)

Finally, and of direct commercial relevance, many of the world's largest and most influential asset owners, foundations, investment managers and corporations are represented at the WEF.  They include, for example, the Bill & Melinda Gates Foundation, General Electric, Credit Suisse and Goldman Sachs.  Obviously, not all WEF representatives (usually CEOs and CFOs) are fully aware of the link between their investment practices, or those of their company pension plans, and sustainable corporate success.  However, the WEF white paper demonstrates its high-level commitment to facilitating a broader global appreciation of these relationships.

Movement in this direction is already evident.  The Norwegian Pension Fund (owned by the Norwegian ministry of finance) is a good example: the Norwegian Finance Minister sent a formal letter welcoming the WEF report. Indeed, the reputation risks of not addressing these links was the topic of a recent NSFM blog post also carried in Responsible investor.

This is a unique and timely opportunity to call attention to the WEF white paper and promote a more sustainable economy. NSFM participants and friends who have connections with Davos attendees might share a copy of the WEF white paper with contacts at those organizations. To find out who is involved with Davos, here are lists of “strategic members” and of WEF partners .

Dr. Frank Jan de Graaf is Professor of International Business at the Hanze University of Applied Sciences and lectures in the executive education program of the Amsterdam Business School.

Keith Johnson is Program Director of the University of Wisconsin Law School’s International Corporate Governance Initiative and former Chief Legal Office at the State of Wisconsin Investment Board..

This article is part of our NSFM opinion series, in which participants propose specific steps towards real and sustainable market reform. Contributors write in a personal capacity. NSFM participants are invited to contribute to the series. Please contact Ebba Schmidt or Frank Jan de Graaf for further information.