An increased focus on the long term, less restrictive regulation and better education are needed before investment in sustainable development becomes a reality, said representatives from the money management and sustainable development industries at a conference Tuesday.
“(There needs to be) far more focus on long-term capital investment projects,” said Jeffrey Sachs, director at the U.N. Sustainable Development Solutions Network and special adviser to the U.N. secretary-general, Ban Ki-moon. “This is our biggest problem — that we are not thinking ahead. And when we have nanosecond trading, we are not thinking about the next generation. Finance in its glory is building the future, not trading the present and the past.”
Mr. Sachs was speaking at the London Financing for Sustainable Development Forum, co-hosted by Investec Asset Management and the U.N. SDSN.
“We need massive increases in infrastructure investment in developing countries — an additional $1 trillion to $3 trillion per annum,” Mr. Sachs added.
Speaking on investment for sustainable development, Hendrik du Toit, CEO of Investec Asset Management, said money managers also have a part to play. “We are not dealing with the issue: that is now (the task) to set a framework to which we can all comply. Markets are quite good at adapting to a framework.”
However, in building that framework, Mr. du Toit warned that any guidelines would require “clear and detailed institutional knowledge” — something he said is often forgotten by academics and politicians. “An understanding of politics and also markets is needed. We have to think around the practical realities, how money is allocated,” he said.
Ian Goldin, director at the Oxford Martin School at the University of Oxford, added that the issue is not necessarily about sourcing capital for long-term investment, but using it. “What’s remarkable in mapping the investment flows into Africa is how people are lining up at the door,” he said. “There is no shortage of capital, but of mobilization.”
He said rules around investment and capital within the financial markets need to be made easier. “Basel III and Solvency II are a travesty in terms of getting capital into long-term markets.”
Lady Lynn Forester de Rothschild, CEO at E.L. Rothschild, added that pension funds and money managers should do more to be responsible investors. “When we talk to companies, we have to be very clear with them that we care about issues like their carbon footprint, their diversity … because when we give money to them, they are fiduciaries to us. If you are measuring them against alpha and beta for the next quarter, that is all they are going to be driven by. It is not outside reason that if they don’t hear from us that we want long-term results, they cannot do it.”