(This version of the March 9 story corrects name in paragraphs 2 and 5)
By Barbara Lewis and Simon Jessop
LONDON (Reuters) - Fund managers who are usually seen as the market’s more patient investors are not holding shares long enough to encourage firms to adjust for a more environmentally sustainable future or deal with other long-term risks, an influential think-tank said.
A report by Two Degrees Investing Initiative showed the average equity manager sold their entire portfolio every 21 months, a pace that shows the influence of equity analysts focused on quarterly reports and more short-term returns.
The think-tank, which is helping the European Commission review policy proposals for European governments on market regulations, said this investment churn stopped businesses plotting for the long term and could short-change shareholders.
The European Union wants to reform capital markets, which it says could do more to redistribute money from polluting industries to greener ones but which are now not encouraging investors to integrate sustainability into their decisions.
The founder of Two Degrees Investing Initiative, Stanislas Dupre, addressed the European Commission in Brussels this week about sustainable investing. He is part of an expert group drawing up policy recommendations by year-end.
“There are hundreds of pieces of regulation which could be changed,” said Dupre.
He said 80 percent of the value of most shares is based on extrapolating current trends, rather than looking further out to when it could be altered by new technology or climate change.
“It’s not necessarily changes in regulation, it might be more precise guidance from the market authorities,” he said, adding such changes could include fresh guidance around risk disclosures and offering a timeframe for those risks to help investors.
Such rules would help the management of pension schemes which must make payouts to pensioners many years into the future.
Editing by Edmund Blair