GLOBAL - The short-term nature and focus of financial markets is inhibiting consideration of environmental, social and governance (ESG) issues in capital allocation and could be hurting long-term company and investment performance, according to First State Investments.
Investors should put more emphasis on pricing ESG issues into every investment decision, the asset manager has said following the publication of its fourth annual Responsible Investment Report.
First State Investments argues that these factors have a significant impact on company performance, with recent research demonstrating that the top-rated ESG stocks in its Global Listed Infrastructure portfolio outperformed the bottom-rated stocks by more than 20% over the three years to May 2010.
Mark Lazberger, chief executive at First State Investments, said the investment industry was showing signs of improving, but needed to go further to achieve best practice ESG management.
"We would like to see a greater number of investors considering ESG risks, and the investment industry has a role to play in encouraging companies to make the required changes.
"Positively, investors are increasingly becoming alert to the importance of ESG issues and challenging the industry to incorporate these considerations into the investment process. As a consequence, we expect capital allocations will be made more efficiently over time."
First State Investments has been a signatory to the United Nations' Principles of Responsible Investment since March 2007 and became a signatory to the Extractive Industries Transparency Initiative in 2009.
Meanwhile, speaking at the Clean Investor 2011 conference in London, Bill Dempsey, director of the Capital Stewardship Program at the United Food and Commercial Workers International Union, said a major crisis in the US retail sector presented an opportunity for affiliated pension funds, environmentalists, trade unionists and worker capital to engage with companies and help the retail sector turn a corner to reduce carbon, improve standards for workers and generate a lot of profit.
Finally, Institutional Shareholder Services has been selected by Clearstream, a wholly owned subsidiary of Deutsche Börse, to deliver its proxy voting solution to domestic and international customers.
The service will be launched in February 2012.