For too long, the majority of the investment community has neglected its fiduciary responsibilities; whilst investors focused on short-term financial returns, most failed to notice the approaching global financial crisis (GFC).
Systematic failures were recognised by the European Commission, which in its amendment to 2007’s Shareholder Rights Directive (the Directive), highlighted that there “is clear evidence that the current level of ‘monitoring’ of investee companies and engagement by institutional investors and asset managers is often inadequate and focuses too much on short-term returns.”1
In the years leading up to, during and following the GFC, Hermes has consistently and vocally advocated for change and helped shape capital markets through public policy and market best practice engagement with legislators, regulators, industry bodies and other standard-setters. We have benefited from extensive experience in the implementation of a number of stewardship and governance codes globally and engaged with businesses on the importance of integrating relevant ESG opportunities and risks into their business strategies to develop sustainable business models. These actions have delivered higher industry standards and in turn, driven legislation such as the Directive.
We believe that the Directive is a profound shift for European asset managers and owners compelling all to end the short-termism that has blighted capital markets, credibly integrate ESG and other long term factors in their investment process and be responsible stewards of investments.
