From Short- to Long-Term: Who Cares?

7th International Sustainability Leadership Symposium 2006

Swiss Re Centre for Global Dialogue, Switzerland

Many, if not most, players in stock market investment who pursue long-term strategies are driven by financial goals. The common objective of these players – institutional investors, asset managers as well as the ultimate beneficiaries – is to achieve maximum risk-adjusted returns over an extended period of time. Consequently, one would expect them to favour stable investments and to put a strong emphasis on companies' long-term performance. Yet, it is a fact that short-term earnings figures continue to play a dominant role in the way companies report their performance and investors make their decisions. This raises a number of important issues. First, from a financial perspective long-term thinking is futile if there are no reliable criteria to show that it can be translated into successful strategies that have a sustained positive effect on profitability. Second, short-term behaviour might be reinforced by the incentive structures in place for those who take the actual investment decisions. This suggests a potential conflict of interests with the ultimate beneficiaries. Third, how companies and investors communicate and interact with each other is strongly influenced by frameworks and regulations, in particular on corporate governance.

What issues are or should be taken into consideration by long-term oriented investors when investing in equity as well as corporate and government bonds in order to achieve maximum risk-adjusted returns over time? Are the commonly used valuation and rating models appropriate to estimate the future cash flows of investees? And what does the empirical evidence tell us about the success of long-term investment strategies?

J. Frank Brown, Dean, INSEAD Abby Joseph Cohen, Managing Director & Chief US Investment Strategist, Goldman Sachs Hans-Peter Burkhard, Director, Center for Corporate Responsibility and Sustainability (CCRS) Wilfried Hauck, Managing Director, Allianz Global Investors Advisory Thomas Müller, CFO, Swiss Life Heinrich Wiemer, Strategy Consultant, Capital Market Strategies Jean-Louis Nakamura, CIO, Fonds de Réserve pour les Retraites Dominique Biedermann, Executive Director, Ethos, Swiss Foundation for Sustainable Development Travis Engen, former President and CEO, Alcan Stefan T. Bichsel, Partner, Lombard Odier Darier Hentsch Michael Bernegger, Head Asset Management, Swiss Life Craig Metrick, US Head of Responsible Investment, Mercer Investment Consulting Giuseppe Benelli, CIO, Vontobel Group Peter Ohnemus, CEO & President, Asset4 Dominique Habegger, Head Research, Asset4 Hans C. Steckling, Chairman & CEO, HCS-Consulting Brunno Maradei, Assistant Director, EIRIS Ivo Knöpfel, Managing Director, onValues Wim Vermeir, Member Executive Committee, Dexia Asset Management Iris Bohnet, Associate Professor of Public Policy, Kennedy School of Government, Harvard University Winston H. Hickox, Portfolio Manager Environmental Initiatives, CalPERS Peter Voser, CFO, Shell Thomas Scheiwiller, Partner, Head of Governance, Risk & Compliance Services, PricewaterhouseCoopers Markus Nöthiger, Senior Manager, Global Risk Management Solutions, PricewaterhouseCoopers Colin Melvin, Corporate Governance Director, Hermes Pensions Management Brian Harrison Spence, Founder, economie David R. Scott, Scott+Scott, LLC Heiko Spitzeck, Director, oikos International Gordon B Hagart, Senior Consultant, onValues