KEY POINTS:
Investing long term with an eye to social and environmental sustainability is simply good business, Al Gore says.
In a flying visit to Auckland last week he presented his climate change slide show to an invited audience at Auckland University's business school, but also talked to the guardians
of the New Zealand Superannuation Fund.
He is chairman of a firm called Generation Investment Management, which focuses on long-term investments selected not only on the basis of the kind of information to be found in financial statements, but also on sustainability criteria.
Based in London and Washington, it is still a relatively new kid on the investment block. It was founded in 2004 by Gore and David Blood, a former chief executive of Goldman Sachs Asset Management. It has about US$500 million ($750 million) under management.
"Sustainability involves not just environmental issues like the climate crisis and water but how you treat the communities you are involved with and how you treat employees as well," Gore said.
"I really believe the investment community has adopted short-termism to its own detriment as well as the world's. That's in the process of changing but the resistance to that change is quite impressive." Thirty years ago in the US the average stock-holding period was seven years.
"Now the average mutual fund will turn over 100 per sent of its portfolio in les than 11 months. They call it 'momentum investing' but that's what I did in Las Vegas two weeks ago."
Institutions with long-term liabilities like pension schemes needed to match them with long-term assets.
"At this point the environment and other sustainability values are all too often given short shrift. Yet the business case of including them in every calculation is quite strong because they affect value."
NZ Super Fund chief investment officer Paul Dyer said that in terms of that insight the difference between Generation and other managers was more one of degree than of kind.
"To the extent that it proves successful over time, one would expect to see these kinds of perspectives absorbed into mainstream investing. To what extent that happens, only time will tell."
The need for longer-term investments had been met in part by the rise of private equity, which typically operated with a time horizon of a decade or so, he said. And it was unfair to characterise all conventional securities managers as chopper-term traders, Dyer said, citing Boston-based GMO - one of the managers the NZ Superannuation Fund uses - as one with a medium-term value approach.