Discussion Paper Details

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Title: Investing for Long-Term Value Creation

Author(s): Dirk Schoenmaker and Willem Schramade

Publication Date: September 2018

Keyword(s): Active investment, adaptive markets hypothesis, engagement, ESG factors and fundamental analysis

Programme Area(s): Financial Economics

Abstract: In the transition to a sustainable economy, companies are increasingly adopting the goal of long-term value creation, which integrates financial, social and environmental value. However, investors struggle to invest for long-term value and perform the social function of finance. Traditional investment approaches, based on the neo-classical paradigm of efficient markets and portfolio theory, only capture financial value in their financial risk and return space. Attempts at ESG integration are typically too shallow to overcome this problem. In this paper, we examine the set of issues that make this problem so stubborn and we outline the contours of an alternative paradigm that is better able to pursue long-term value creation. Its elements include short investment chains, active management that assesses companies' transition preparedness, concentrated portfolios, and deep engagement.

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Bibliographic Reference

Schoenmaker, D and Schramade, W. 2018. 'Investing for Long-Term Value Creation'. London, Centre for Economic Policy Research.