Investors will step up corporate governance monitoring

Subject

Corporate governance.

Significance

Policymakers in Europe are, for the first time, pressing institutional investors to police the capital market by exercising tools of stewardship. US policy has taken similar steps, and this top-down pressure is finding echoes at the grassroots level. Worldwide targets include the kind of systemic risk that sparked the global financial crisis and a host of socially unwelcome corporate traits including unethical behaviour, richly rewarding failing CEOs, lack of diversity on boards and passivity in the face of climate change threats.

Impacts

• Some boards are already responding to the scale of investor transformation, but for many it may take a shareholder crisis to bring action.
• The responsible investment trend has momentum -- firm transparency and diversity will rise; climate risks and excessive CEO pay will fall.
• Boding well for the sector, surveys show socially responsible investment entices women and 'millennials' more than older savers.