iv) Investors

iv) Investors

“Private equity has been a contributor to growing inequality because often jobs are lost or moved offshore and any economic gains have been disproportionately distributed to fund managers and investors as opposed to the workers.” – Bill Young, Founder and Chairperson of Social Capital Partners

A considerable percentage of Survey Participants affirm that it is crucial for investors to step up in a serious manner if business leaders are going to be able to transform their businesses into purpose-driven organizations, as those investing in businesses and ultimately providing capital to the markets are undoubtedly in a strong position to influence businesses’ collective behaviour. A significant number of the Survey Participants are skeptical that investors are using their privileged positions to exert a positive influence on societal issues. While using the example of pension funds, Bill Young, Founder and Chairperson of Social Capital Partners, explains, “Pension funds see their role as earning the best possible return for their beneficiaries and likely feel they have no responsibility for what is their indirect role in the impact private equity is potentially having on our growing inequality.” Indeed, judging from the Survey Participants answers, it does not appear that investors are applying as much pressure as they could on Business Leaders to enhance their engagement on societal challenges. In fact, with the response ‘All of the above’ extracted, only 16% of the Business Leaders group and 4% of the Accelerators group explicitly bring up ‘Investors’ as one of the stakeholders applying pressure for businesses to do more on societal issues. (see ‘DEEPER DIVE: Customers’ Pressure’ above). Some of the Survey Participants lament that investors apply pressure for short-term growth rates instead of long-term performance or broader societal good. One Business Leader surveyed bluntly comments, “Every investor says they are long-term investors, but they are not.” Many Survey Participants argue that more pressure needs to come from investors if capitalism is going to modernize to include considerations with respect to societal impact on the same level as growth and profitability. Tamara Vrooman, who sings the praises of how employees are applying the right type of pressure, states that investors and shareholders are not doing enough in this regard and are essentially the “biggest nut to crack”. However, some are of the view that investors are starting to apply additional pressure on businesses to be more purpose-driven and address societal concerns. For instance, there is increasing pressure from investors for businesses to increase reporting on ESG (Environment, Social, Governance) metrics. One Business Leader surveyed affirms, “The expectations of investors are changing. The investment community is no longer simply looking for financial reporting of companies, they also really want to understand what a company does in the environmental, social, and governance realms.” Michael Sabia, who served as CEO of the CDPQ, postulates businesses are going to get more pressure to disclose carbon footprints on account of new regulations or investors getting together to demand it. Moreover, the number of institutional investors that have committed to reducing or eliminating fossil fuel investments from their portfolios has increased significantly over the last few years.8 Marc-André Blanchard foresees that in about a decade, impact investing will not exist as every investment will need to demonstrate impact.