We permit the publication of our auditors’ report, provided the report is published in full only and is accompanied by the full financial statements to which our auditors’ report relates, and is only published on an access-controlled page on your website, to enable users to verify that an auditors’ report by independent accountants has been commissioned by the directors and issued. Such permission to publish is given by us without accepting or assuming any responsibility or liability to any third party users save where we have agreed terms with them in writing.

Our consent is given on condition that before any third party accesses our auditors’ report via the webpage they first document their agreement to the following terms of access to our report via a click-through webpage with an 'I accept' button. The terms to be included on your website are as follows:

I accept and agree for and on behalf of myself and the Trust I represent (each a "recipient") that:

  1. PricewaterhouseCoopers LLP (“PwC”) accepts no liability (including liability for negligence) to each recipient in relation to PwC’s report. The report is provided to each recipient for information purposes only. If a recipient relies on PwC’s report, it does so entirely at its own risk;
  2. No recipient will bring a claim against PwC which relates to the access to the report by a recipient;
  3. Neither PwC’s report, nor information obtained from it, may be made available to anyone else without PwC’s prior written consent, except where required by law or regulation; and
  4. PwC’s report was prepared with Hermes Property Unit Trust's interests in mind. It was not prepared with any recipient's interests in mind or for its use. PwC’s report is not a substitute for any enquiries that a recipient should make. The financial statements are as at 25 March 2017, and thus PwC’s auditors’ report is based on historical information. Any projection of such information or PwC’s opinion thereon to future periods is subject to the risk that changes may occur after the reports are issued and the description of controls may no longer accurately portray the system of internal control. For these reasons, such projection of information to future periods would be inappropriate.
  5. PwC will be entitled to the benefit of and to enforce these terms.
I accept

1. Select your country

  • United Kingdom
  • Austria
  • Australia
  • Belgium
  • Denmark
  • Finland
  • France
  • Germany
  • Iceland
  • Ireland
  • Italy
  • Luxembourg
  • Netherlands
  • Norway
  • Singapore
  • Spain
  • Sweden
  • Switzerland
  • USA
  • Other

2. Select your investor type

  • Financial Advisor
  • Discretionary Investment Manager
  • Wealth Manager
  • Family Office
  • Institutional Investor
  • Investment Consultant
  • Charity, Foundation & Endowment Investor
  • Retail Investor
  • Press
  • None of the above

3. Accept our terms and conditions

By clicking Proceed I confirm I have read the important information and agree to the terms of use.


The Hermes Investment Management website uses cookies to remember your preferences and help us improve the site.
By proceeding, you agree to cookies being placed on your computer.
Read our privacy and cookie policy.

Are low yields and volatility killing responsible capitalism?

Home / Press Centre / Are low yields and volatility killing responsible capitalism?

Saker Nusseibeh, CEO, Hermes Investment Management
19 September 2016

Hermes Investment Management, the £26 billion manager focused on delivering superior, sustainable, risk adjusted returns to its clients – responsibly, has today published the first paper from its annual Responsible Capitalism survey[1], Many rivers to cross – Slow progress towards responsible capitalism.

The survey reveals a number of emerging trends that have worrying consequences for responsible capitalism advocates. The survey of 102 leading UK & European institutional investors found that 7% fewer investors believe significant environmental, social and governance (ESG) risks justify rejecting an otherwise attractive investment than a year ago. This is despite an annual 10% increase of investors (56.4%) believing companies that focus on ESG issues produce better long-term returns.

Furthermore, when asked if organisations that adhere to strong ESG principles are less susceptible to market volatility, a total of 80.2% of those surveyed responded ‘no’ or ‘don’t know’ (59.3%/20.9%). There was also a 1.8% increase from last year in those surveyed who believed managers should not price in corporate governance risks as a core part of their investment analysis, alongside traditional financial metrics.

Saker Nusseibeh, Chief Executive, Hermes Investment Management believes the current lack of yield and increased volatility may have pushed increasingly under-pressure investors to turn their back on responsible capitalism.

Nusseibeh said: “Dwindling income streams and escalating volatility may have caused an increasing amount of normally ethically-minded investors to eschew principles of responsible investing and adopt an investment strategy based on short-termism.

“What we are seeing are hard-wired psychological responses to meeting volatility event by event, and a relentless focus on short-term financial outcomes. Investors are not only failing to recognise the long-term and profound implications of their decision making, but also that ESG considerations are still very much compartmentalised rather than being included in core economic-based decisions.

“We believe this to be fundamentally wrong, not least because a truly long-term view, i.e. investing with conviction in good companies and assets, gives a compass with which to navigate choppy market waters.”

Maximising pension returns still trumps improving society

The survey revealed that 44.6% of those surveyed believe pension funds should not give greater consideration to whether their current investments will improve or detract from the overall quality of life experienced by beneficiaries when they retire, and instead focus exclusively on maximising retirement incomes. Of the remaining respondents, 41.3% percent of investors disagreed, while 14.1% did not know.

However, when asked, given the fiduciary duty of pension funds to maximise retirement incomes for beneficiaries, 60% of institutional investors felt that significant ESG risks with financial implications justified rejecting an otherwise attractive investment.

Nusseibeh continued: “While things are moving in the right direction (4.3% more respondents agreed that investors should give increased consideration to quality of life than last year), global capital is still not managed in a way that takes responsibility for shaping society seriously.”

Short-termism prevails but there are positive broader trends

While the survey shows a trend towards short-termism, there are broader, more positive shifts embracing ESG concerns and responsible capitalism. In fact, 73.1% of respondents expect to see more investment opportunities rejected by pension schemes due to ESG risks, while only 1.1% expect the number to decrease.

The survey also suggested investors are thinking about the impact of their investee companies, as 55.4% consider ESG monitoring and reporting of supply chain to be either ‘vitally’ or ‘ very’ important.

“Investors are increasingly aware of the importance of seeing companies in the context of their stakeholder relationships. However we are still waiting to see the gradual shift in mind-sets reflected in portfolios,” stated Nusseibeh.

Investors to shun companies engaging in strategic tax avoidance

In what is becoming an increasingly global issue, 47.7% of respondents believed institutional investors would not continue to invest in companies that have been in public focus for the strategic avoidance of corporate tax, regardless of financial returns.

On the issue of transparency, 61.8% of respondents believed fund managers should be more transparent and share their ESG analysis of companies with clients on at least a quarterly basis.

Nusseibeh, said: “The evidence from the survey shows that while investors are beginning to feel uncomfortable about companies that behave poorly – such as the big polluters or those avoiding paying their share of taxes to support the future development of societies – it is taking a long time for those companies to be excluded from portfolios.

“The investment community fails to accurately account for the effect of those factors on the value of economic activity and, by extension, future returns. The result is a yawning gap between what savers want and what the investment community can deliver. There is clearly some way to go in convincing investors to think about retirement outcomes in broader terms than maximising retirement incomes.”

How capitalism can shape a better future

Nusseibeh said: “Ultimately, investors must reject the emerging short-termism revealed and consider how we can better harness capital to shape a better future. The separation of investment returns and outcomes happens because investors have learnt over many generations to look at value in two-dimensional terms: risk and time, which sit at the heart of all discounting methods and asset pricing models used in finance today. When investors are calculating expected future returns of investment, a positive or negative external impact on society is therefore treated as an addendum.

“This view cannot prevail in the long-term. The decisions we make as asset owners and asset managers are the single most powerful force in shaping the society of tomorrow. Very little in the world can happen without the allocation of capital – we can decide to invest in new technologies or hold companies to account for their behaviour. We as investors must understand that capital is the greatest weapon in the fight to shape the future.”

[1] Survey conducted by Citigate Dewe Rogerson

Share this post:
Saker Nusseibeh CEO, Hermes Investment Management Saker is Chief Executive of Hermes, chair of its Executive Committee and an Executive Board Director. Saker was appointed CEO in May 2012, having been acting CEO since November 2011. Saker joined the firm in June 2009 as Head of Investment and Executive Board Director. He is responsible for leading the firm’s growth strategy and ensuring that Hermes continues to deliver excellent long-term investment performance, responsibly. Under his leadership, Hermes has achieved outstanding year-on-year growth in sales, revenues and profitability, while contributing widely to the debate about how to improve the contribution of financial services to society. Critically, long-term investment performance has remained at outstanding levels during his tenure. Prior to joining Hermes, Saker was Global Head of Equities at Fortis Investments USA, having initially been appointed to the firm as CIO Global Equities in 2005. Before this he was CIO of Global Equities and Head of Marketing for SGAM UK. This role followed SGAM’s acquisition of Trust Company of the West (TCW), where Saker was Managing Director, running global and international strategies, as well as managing TCW’s London office. He started his career at Mercury Asset Management in 1987. Saker is a regular public speaker, writer and commentator, appearing at leading industry conferences, on television and radio. He is the founder of the 300 Club, which he chaired from its inception in 2011 until early 2014. The 300 Club is a group of leading investment professionals who seek to challenge investment orthodoxy and improve the contribution of financial services to society. Saker is a member of the CFA Institute’s Future of Finance Advisory Council, a member of the IIRC Council, and was a public member of Network Rail for three years until November 2014. He is Non-Executive Chairman of Carbon Tracker, an independent financial think tank that provides analyses of the impact of climate change on capital markets and investment in fossil fuels. He sits on the Banking Standards Board, which aims to restore trust in the UK banking industry, as a practitioner member. Saker also sits on the advisory board of Mosaic, the charity that seeks to improve the chances of young people and to bring communities together; the UK National Advisory Board on Impact Investing; and the steering committee for the United Nations Environment Programme Finance Initiative. In 2015, Saker was named CEO of the Year at the Global Investor Investment Excellence Awards. Saker has a BA and PhD in Medieval History from King's College, University of London.
Read all articles by Saker Nusseibeh

Find posts by author

  • Alex Knox, ACA
  • Andrew Jackson
  • Andrew Parry
  • Andrey Kuznetsov, CFA
  • Audra Stundziaite
  • Claire Gavini
  • Dr Michael Viehs
  • Elena Tedesco
  • Emeric Chenebaux
  • Eoin Murray
  • Gary Greenberg
  • Geir Lode
  • Geoffrey Wan, CFA
  • Hamish Galpin
  • Harriet Steel
  • Ingrid Holmes
  • Jonathan Pines, CFA
  • Louise Dudley
  • Mark Sherlock, CFA
  • Martin Todd
  • Michael Russell, CFA
  • Michael Vaughan
  • Mitch Reznick, CFA
  • Neil Williams
  • Nick Spooner
  • Nina Röhrbein
  • Patrick Marshall
  • Philip Nell
  • Saker Nusseibeh
  • Silvia Dall’Angelo
  • Tatiana Bosteels
  • Tim Crockford
  • Tim Goodman
  • Tommaso Mancuso

Find posts by category

  • eos

Press contacts