Aside from ESG/SRI reports, which, although voluminous, are not very forceful, COP 21 requires the Boards of Directors of listed companies to establish SRI targets for their business.
These targets would be left to the Boards’ discretion. Recommendations could be made for each business sector by the Externalities Stability Board (or local employer federation) and a percentage of the CEO’s compensation package would then be indexed to their achievement of these non-financial targets.
It is clear that today, in the vast majority of listed companies, it is the CEO who has the power, not the shareholders, because the shareholder structure is too dispersed and unstable.
Human nature suggests that a financial incentive for «risk-takers» to consider non-financial outcomes could create a chain reaction throughout the business. Companies such as Michelin are already doing it for subjects such as occupational accidents, which does not hold it back from being one of the global leaders in its sector.
The asset manager’s perspective:
In addition to financial criteria, the SAI (Advanced Investment Strategy) approach developed jointly by La Française and its English partner IPCM (Inflection Point Capital Management), considers five key factors.
These are ability to innovate, adaptability, environmental sustainability, human capital, capital structure and management structure.
This approach has been shown to outperform conventional asset management, which relies primarily on financial criteria, in a world marked by major disruptive trends.
Some facts are beyond question: the «Uberisation» of Society, demographic trends including those linked to climate change, growing urbanisation, challenges related to longer life spans, the impact of social media on the way our democracies function, etc.
As a third-party asset manager, not taking into account the impact of these phenomena on the future performance of companies, sectors and countries would be equivalent to leaving our clients unprepared for market trends, and we would not be fulfilling the responsibility they have entrusted to us: a fiduciary obligation to provide lasting financial and economic performance.
This performance will be partially contingent on externalities, whether they provide opportunities for development or impose constraints upon it.