LONDON: Environmental campaigner and former U.S. vice president Al Gore urged pension funds in the country to use their might to influence corporate decisions on environmental issues. He denounced the tendency of company managers to meet short-term profit targets, which he said adversely affected the efforts to control climate change.
Speaking at the annual investment conference of the National Association of Pension Funds in Edinburgh, Gore said while the market suffered from short-termism, it also suffered from a routine setting aside of an improvement of its sustainability failures.
He recommended that the remuneration of fund managers should be linked to at least three years of performance in order to enable them take longer-term positions on companies instead of the practice of changing portfolios over few months.
Gore gave a keynote address at the conference on "Global pensions and investment challenges," in his capacity as chairman of the U.K.-based Generation Investment Management, which is involved in developing new approaches to sustainable investment. He said when managers abandon short-term targets and adopt better environment practices, they would be able to have better returns for pension funds in the longer run. Regulatory processes will eventually penalize those who failed to take a proactive approach to managing their carbon footprint, he added.
Trustees and managers of pension funds have a fiduciary obligation to look much more closely at the impact of the climate crisis on the companies in which they are investing, he said. He wanted them to look at ways to integrate sustainability systematically into their analysis of what is a good investment.
He said, "Whether it's by cap and trade, by taxation or by regulation, accountability for carbon is going to be a regular part of the marketplace sooner or later."
He added, "I believe very deeply that we're now in an era of history that has suddenly rushed upon us, that has some very different characteristics including a number of challenges that we would in the past have associated with very long-term cycles, but are occurring much more quickly than we expected.
"The climate crisis is, in my view, by far the most important of those."
In this backdrop, it will be the sustainability factors like environment, treatment of company employees, involvement in community affairs and adherence to business ethics that will determine the performance of companies, he added.
Gore said pension funds are suffering from short-termism as they seek higher returns and felt most of them had not done any careful analysis of the assumptions on longevity built into their plans. He added sustainable investing had a "hand and glove linkage with long-term investing".
Generation Investment Management is a joint effort between Gore and David Blood, former chief executive of Goldman Sachs Asset Management. It describes itself as a "sustainable investment" firm and its strategy is based on the premise that sustainable development will be one of the main drivers of economic and industrial change in the future.
