Gore urges pension funds to act on the environment
Thursday, 15 March 2007
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The former US vice-president Al Gore hit out at the short-termist attitude of corporate executives and fund managers yesterday, urging the British pension fund industry to use its muscle to force companies to take a more responsible approach to environmental issues.
Speaking at the National Association of Pension Funds' annual investment conference in Edinburgh, Mr Gore warned that companies' obsession with meeting short-term profits targets, rather than taking a longer-term view, was working against the battle to reverse climate change.
"If the market has suffered from short-termism, it has also suffered from a routine setting aside of an improvement of its sustainability failures," he said.
Mr Gore suggested that fund managers' pay be linked to a minimum of three years' performance, to encourage them to take longer-term positions in companies, rather than turning their portfolio over every few months. He said that 30 years ago, the average period for which a US investment fund held a stock was seven years. Today, the average mutual fund turns over its entire portfolios in 11 months.
Mr Gore was booked for the conference in his capacity as chairman of Generation Investment Management, a UK-based group which is focused on developing new approaches to sustainable investment. He said that putting an end to short-termism in the boardroom, and encouraging better environmental practices, would ultimately achieve better returns for pension funds in the longer run. He said increased regulatory intervention would eventually penalise those who did not take a proactive approach to managing their carbon footprint.
"Whether it's by cap and trade, by taxation or by regulation, accountability for carbon is going to be a regular part of the marketplace sooner or later," he said. He cited the example of Toyota and General Motors. Toyota, which has led the way in the environmentally friendly car market, is now one of the only profitable car manufacturers in the world. In contrast, GM, which has taken a less proactive approach to its environmental responsibilities, has been less successful.
Mr Gore said pension fund trustees and managers had a "fiduciary obligation" to look much more closely at the impact of the climate crisis on the companies in which they are investing.
"I am urging you to look at ways to integrate [sustainability] systematically into your analysis of what is a good investment," he said. "We have everything we need to make this transition with the possible exception of the will to act. But the will to act is a renewable resource."
Mr Gore has been a long-term environmental campaigner. Last year, he released a film documentary, An Inconvenient Truth, explaining the extent of the current environmental crisis.
