GLOBAL - Investors should use their financial muscle to create a resilient, stable and sustainable economy and lobby governments for support, urges a report released today by Forum for the Future.
The report, called 'Sustainable Economy in 2040: a roadmap for capital markets', warns that capital markets are funding activities that are pushing the planet beyond safe environmental limits and threatening investors' long-term interests.
It warns: "Investors as a whole will find it hard to maintain healthy financial returns if faced with accelerating climate change and ecosystem collapse."
The report calls on investors to put pressure on businesses to build sustainability into their strategy and lobby for government intervention, and gives practical guidance on where to invest and avoid investing.
Investors, for example, should require all companies to report on their long-term strategy to make the business more sustainable and deal with future risks such as climate change, water stress, loss of biodiversity and population growth.
Pension funds should require fund managers to take social and environmental issues into account in their investments, while financial institutions should demonstrate that the products and services they offer serve the long-term public good and do not increase risk and instability.
The report also offers investors specific guidance on investing in five sectors that are fundamental to a sustainable future: food, health and wellbeing, energy, mobility and finance.
This is based on a vision of where these sectors need to be in 30 years in order to be viable and sustainable.
Alice Chapple, director of sustainable financial markets at Forum for the Future, said: "Investors have a vital role to play in creating an economy that puts us on a path to sustainable growth. They will generate the best long-term returns for their clients - and the best future for us all - if they look actively for new technologies, products and business models that benefit the planet and improve people's lives."
Peter Michaelis, head of SRI at Aviva Investors, added: "However, to achieve Forum for the Future's full vision of a sustainable economy, we will need much more action by both investors and global governments to correct the market signals.
"The capital market will only incorporate companies' full social and environmental costs into their company valuations where these issues influence company earnings."
The report, which was commissioned by Aviva Investors' SRI team, is available to download free here.
In other news, Dutch asset manager APG has updated its corporate governance and voting policy.
The Corporate Governance Framework 2011 sets out the guiding principles for responsible ownership and how these translate into APG's detailed voting policy and its implementation, how it engages with investee companies and APG's approach to shareholder litigation.
Under the new voting policy, APG also expects the board to consider whether it is appropriate to include in its remuneration policy factors (other than financial ones) that can have an impact on long-term company value, such as sustainability matters.
The Framework can be found here.
Finally, index provider FTSE Group has announced changes to the FTSE4Good index series following September's semi-annual review.
At the review, 22 companies were added, including seven European companies that met the criteria for inclusion such as UK-based media company Euromoney Institutional Investor, private equity firm 3i Group and French pharmaceutical company Ipsen.
At the same time, four companies were deleted from the index for failing to meet FTSE4Good criteria.
The changes to the index will be effective after the close of markets on 16 September.
In the 10 years since its launch, the index series has seen 290 companies deleted and 815 companies added in 21 reviews.