David Gait, senior portfolio manager of First State, has criticised the wider investment industry, saying it is “not fit for purpose” due to its inherent short-term attitude.
Speaking to What Investment, Gait emphasised the need for taking on a long-term perspective and argued, “Sustainability is the driver of returns.”
He expressed his concerns on how the wider investment industry had been failing to incorporate sustainability, and instead had concentrated on only obtaining immediate profit.
“The [investment] industry is not fit for purpose”, Gait said.
“The most important problem is the collapse in time horizons.”
To illustrate his point, Gait recalled a prospectus he had read back in 2009. The company in question had faced 172 litigation cases, ranging from harassment to fraud, and on top of this, the country’s prime minister had publicly opposed one of its planned developments in an environmentally protected area.
Another example of a doubtful investment opportunity came when Gait was visiting a rice company that in principle, showed great potential. However, it became apparent that the business employed child labour.
In response, Gait ruled out investing not only in that specific firm, but also many others that shared a board member with it.
He concluded by warning companies that tried to compromise on ethical and sustainable investing of its consequence: “Companies that cut corners will always get found out; we just don’t know when they will.”
Sustainable investment needs to be ‘core to how we live our lives’
We need investment that prioritises long-term wellbeing for people and planet’
The long-term matters, and sustainable investment holds the key to prosperity
Are we investing in the future we want for our children and grandchildren?
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