The EU must improve company reporting and incentivise long-term investment if plans laid out by the new European Commission chief Jean-Claude Juncker are to be fulfilled, according to Aviva.
The insurer and asset manager has published a Sustainable Capital Markets Union manifesto as a response to Juncker's proposal to create a Capital Markets Union that would develop and integrate capital markets across Europe and reduce reliance on bank funding.
Aviva sees two sources of strategic risk to economic growth: economic activity that assumes unlimited natural resources, creating a flawed pricing system in capital markets; and capital markets that are systematically short term, magnifying the problem of flawed pricing.
The firm, which manages more than €300bn of assets, suggests four areas of policy that need attention:
- Investors need better information about companies, such as on their environmental and human rights performance;
- Fund managers, investment consultants and other market participants should be rewarded for long-term performance and sustainability, not short-term achievements;
- There should be regulations and standards to encourage sustainable growth; and,
- Investors should be encouraging to be 'responsible' owners of companies.
Aviva CEO Mark Wilson said: "We must continue to learn from the recent financial crisis, and one big lesson is that short-termism is dangerous… Our goal must be to build a financial and regulatory system that looks to the long term and creates and supports stability. That's why Aviva has published this manifesto in response to the European Commission's Capital Markets Union initiative. We call on the Commission and European policymakers to have the long-term sustainable development of financial services and markets at the forefront of their mind as they take forward this important initiative."