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Dawn of the Vestors

Dawn of the Vestors – Sympathetic investing is breaking through.

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Dawn over New Zealand.  Courtesy of : https://www.emigrationstore.com/moving/before-you-go

In our previous article dated 09 June 2016, BIA proposed a novel addition to the global investment lexicon by suggesting we add the term Vestor.  According to BIA, the definition of a Vestor is “any person who has any personal stake in the outcomes produced by an organization.”  A Vestor has a vested interest, synonymous with being a stakeholder.

In keeping with our focus on reporting developments in the Vestor sphere, BIA Investor Relations recently met the CEO of the Social Stock Exchange (SSX) in London, Tomas Carruthers to find out more about the world of ethical investing.  The Social Stock Exchange’s mission is “To create an efficient, universally accessible buyers’ and sellers’ public marketplace where investors and businesses of all sizes can aim to achieve greater impact either through capital allocation or capital raising.”

Further, the London Social Stock Exchange aims to provide “access to the world’s first regulated exchange dedicated to businesses and investors seeking to achieve a positive social and environmental impact through their activities.”

It was heartening to meet with Mr Carruthers and hear his comments on the efforts to broaden his investor bases globally and his frequent quotes from Adam Smith.   Before you raise your eyebrows at the notion of Scottish Enlightenment era philosophy in the heart of the City, the efforts of Mr Carruthers and his team are replicated across the globe.  The SSX itself already has 44 listings with a collective valuation of more than US$ 3 billion since starting in June 2013.

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Courtesy of: https://commons.wikimedia.org/wiki/File:Royal_Exchange,_London.jpg

Across the world investors are taking note, including in Singapore, which established the publicly listed Impact Investment Exchange in 2009, and several other nations considering the concept or having established such exchanges, according to Stanford University (https://ssir.org/articles/entry/the_rise_of_social_stock_exchanges)

On a recent visit by one of the BIA directors to New Zealand we were made aware of the New Zealand Superannuation Fund.  A long-term, growth-oriented investor, the Fund has more than $30 billion in assets, including $4 billion invested in New Zealand.

The New Zealand Superannuation Fund defines responsible investment as integrating “environmental, social and governance (ESG) factors into our investment process and ownership activities.”  The Fund records some of the best results in the world and was rated by JP Morgan as “as the best performing sovereign wealth fund in the world, following a global study on fund performance over a five-year period.”(2015)

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It has also dawned on New Zealand Parliament, Wellington, affectionately known as the Beehive.  Courtesy of http://www.stuff.co.nz/dominion-post/culture/blogs/greer-2-0/1880706/Shortland-St-defines-my-day

Reverting to Adam Smith, based on our understanding of both the Theory of Moral Sentiments (1759) and the Wealth of Nations (1776), the Invisible Hand works best when it is based on a natural sympathy to others, which means, among others, focusing on win-win outcomes.  The current evidence, as noted earlier, seems to confirm that working on a sympathetic basis, keeping Vestors as well as Investors in mind, creates above average long term benefits.   Economics is thereby no longer a game of pinball played by rational economic actors.

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Hypothetical discourse in heaven between Adam Smith and Milton Friedman .  Courtesy of Robisto

A recent report by the Manhattan Institute in the USA, reporting on corporate governance and shareholder activism in 2016, shows that shareholder proposals concerning social and policy issues are increasing year on year.  This may be evidence of an increasing awareness by shareholders that social, environmental and human rights focused on the wider stakeholder community are valid issues to be considered by companies.

We leave our final comment to Adrian Orr, CEO of the New Zealand Superannuation Fund, which sums up the debate.

“We do not undertake responsible investing out of altruistic kindness, or purely because we are legislated to have concern. Rather, we do it because ESG issues sit firmly amongst our investment beliefs, and hence assist in underpinning our confidence in expected returns and consistency with our preferred operating style and beliefs. ESG has become part of our DNA, and again we have been recognised globally for our approach.” (Speech to the Trans-Tasman Business Circle, October 2013).

About the Author: Ferdinand Balfoort is Global Services Director for BIA Investor Relations based in our London office, focusing on facilitating market entry of global companies into the UK as well as EU capital markets.  BIA is proud to support the broader global move towards Vestor Relations and a longer term focus on fair and equitable inter-generational investments by introducing US companies to list on the London SSE.