Forbes: Asset Owners Need To Take Responsibility For System-Level Risks

Much has been written about the negative consequences of public companies focused on short-term returns. Investors focused on quarterly earnings are usually blamed, along with the structure of executive compensation plans and pressure from the board of directors. The concern here is that companies are inhibiting investors’ ability to produce sustainable long-term returns. 

This debate is an important one, but it is incomplete. It ignores the overall asset allocation strategies of investors across all asset classes. Investors include both asset owners and asset managers, but little can be done without substantial changes by the asset owners, who sit at the top of the “capital markets value chain.” This issue is addressed in great depth in the Working Paper “ESG 2.0: Measuring & Managing Investor Risks Beyond the Enterprise-level” by Delilah Rothenberg, Raphaele Chappe, and Amanda Feldman of The Predistribution Initiative (PDI).